Productivity Measurement and Monetary Policymaking During the 1990s

FRB of St. Louis Working Paper No. 2005-067A

62 Pages Posted: 8 Nov 2005

See all articles by Richard G. Anderson

Richard G. Anderson

Federal Reserve Bank of St. Louis - Research Division

Kevin L. Kliesen

Federal Reserve Bank of St. Louis - Research Division

Date Written: October 2005

Abstract

The acceleration of productivity growth during the latter half of the 1990s was both the defining economic event of the decade and a major topic of debate among Federal Reserve policymakers. A key aspect of the debate was the conflict between incoming aggregate data, which initially suggested little productivity gain, and anecdotal firm-level evidence which hinted at an acceleration. Some FOMC members feared an overheating economy and higher inflation; others, including the Chairman, argued that revolutionary increases in productivity were occurring and the Committee should not prematurely forgo significant future gains in real income by tightening policy. We review the difficulty of measuring productivity during periods of rapid quality change, the large magnitude of subsequent data revisions during the 1990s, and, from FOMC transcripts, the contemporary monetary policy debate within the FOMC as the decade's data evolved.

Keywords: productivity, real-time data, vintage data, monetary policymaking

JEL Classification: E01, E22, E52

Suggested Citation

Anderson, Richard G. and Kliesen, Kevin L., Productivity Measurement and Monetary Policymaking During the 1990s (October 2005). FRB of St. Louis Working Paper No. 2005-067A. Available at SSRN: https://ssrn.com/abstract=840146 or http://dx.doi.org/10.2139/ssrn.840146

Richard G. Anderson (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

Kevin L. Kliesen

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

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