Similarly, economic  18  R.J. Gordon and I. Dew-Becker (2005), “Where Did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income,” Brooking Papers on Economic Activity, no. 2. pp 67-127. 10  BIS Review 94/2007  and market analysts regularly revise their assessment of trend productivity and output growth as new data become available.
A simple way to capture these effects can be to assume that underlying productivity shocks are unobservable, so that economic agents must assess over time the persistent nature of observed developments. 19 The third desirable ingredient is that economic agents must be forward looking to a certain degree, so that perceived future productivity developments must be allowed to impact on their current decisions.