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"Testing for a New Economy in the 1990s,"
Business Economics, January 2004, 43-53.
pdf file (2,677 KB).
This paper examines how much structural change there was in
the U.S. economy in the last half of the 1990s.
The results are consistent with the hypothesis
that there was only one major structural change,
namely the huge increase in stock prices relative to earnings.
All other large changes can be explained by this change.
There is no obvious reason for the large increase in stock
prices relative to earnings. Increased productivity growth does not
appear to be an answer since the data show that there was
only a modest increase
in long run productivity growth in the last half of the
1990s. Also, earnings growth and the share of earnings in the economy
were not unusually large.