Given that revisions of our perceptions of productivity developments are unavoidable and frequent, policy should react gradually to perceived developments. To the extent that shocks will normally be perceived as temporary by all economic agents, one might expect the wealth effect to be small, and the supply effect to prevail.
Over time, however, as new data releases may lead to changes in perceptions of the nature of shocks, individual behaviour and policy can be readjusted accordingly. These results highlight the importance of detailed analyses to understand the determinants of observed productivity developments, and to gauge how long a productivity slowdown would last.