Observed macroeconomic forecasts display gradual recognition of the long-run growth of endogenous variables (e.g. output, output per hour) and a positive correlation between long-run growth expectations and cyclical activities. Existing business cycle models appear inconsistent with the...

The paper examines the effect of trend productivity growth on the determinacy and learnability of equilibria under alternative monetary policy rules. It shows that under a policy rule that responds to current period inflation and the output gap a higher trend growth rate relaxes the conditions...