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Fluctuations in Convex Models of Endogenous Growth II: Business Cycle Properties

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Author Info
Larry E. Jones (University of Minnesota)
Rodolfo E. Manuelli (University of Wisconsin)
Henry E. Siu (University of British Columbia)

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Abstract

Using ideas from the endogenous growth literature, we present a model of the endogenous determination of productivity growth based on individual worker decisions about human capital investment. We calibrate a version of the model to match long run growth facts from the US and study the business cycle properties of this model. This approach offers improvements along several dimensions over standard exogenous growth methodologies. Most importantly, our stochastic endogenous growth model generates much greater serial correlation in output growth and labor supply volatility relative to its real business cycle counterpart. We conclude that using the extra discipline of reproducing the trend productivity growth features of the data endogenously constitutes an important missing component from the real business cycle approach. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2005.05.005
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Publisher Info
Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 8 (2005)
Issue (Month): 4 (October)
Pages: 805-828
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Handle: RePEc:red:issued:v:8:y:2005:i:4:p:805-828

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Related research
Keywords: Business cycle fluctuations; Human capital investment; Productivity growth;

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Find related papers by JEL classification:
E00 - Macroeconomics and Monetary Economics - - General - - - General
E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Max Gillman & Mark N Harris & Michal Kejak, 2007. "The Interaction of Inflation and Financial Development with Endogenous Growth," Money Macro and Finance (MMF) Research Group Conference 2006 29, Money Macro and Finance Research Group. [Downloadable!]
  2. Ilaski Barañano & Paz Moral, 2007. "Consumption-Leisure Trade-offs and Persistency in Business Cycles," BILTOKI 200705, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística). [Downloadable!]
  3. Paul Pichler, 2007. "On the accuracy of low-order projection methods," Economics Bulletin, Economics Bulletin, vol. 3(50), pages 1-8. [Downloadable!]
  4. Arato, Hiroki, 2008. "Optimal operational monetary policy rules in an endogenous growth model: a calibrated analysis," MPRA Paper 8547, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  5. François Gourio, 2009. "Disasters Risk and Business Cycles," NBER Working Papers 15399, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Konstantinos Angelopoulos & Jim Malley & Apostolis Philippopoulos, 2008. "Welfare implications of public education spending rules," Working Papers 2008_37, Department of Economics, University of Glasgow. [Downloadable!]
    Other versions:
  7. Konstantinos Angelopoulos & Apostolis Philippopoulos & Vanghelis Vassilatos, 2007. "Rent-seeking competition from state coffers in a calibrated DSGE model of the euro area," Working Papers 2007_29, Department of Economics, University of Glasgow. [Downloadable!]
  8. Larry E. Jones & Rodolfo E. Manuelli & Henry E. Siu & Ennio Stacchetti, 2005. "Fluctuations in Convex Models of Endogenous Growth I: Growth Effects," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(4), pages 780-804, October. [Downloadable!] (restricted)
  9. Benk, Szilárd & Gillman, Max & Kejak, Michal, 2008. "US Volatility Cycles of Output and Inflation, 1919-2004: A Money and Banking Approach to a Puzzle," Cardiff Economics Working Papers E2008/28, Cardiff University, Cardiff Business School, Economics Section. [Downloadable!]
    Other versions:
  10. Konstantinos Angelopoulos & Apostolis Philippopoulos & Vanghelis Vassilatos, 2006. "Rent-Seeking Competition from State Coffers: A Calibrated DSGE Model of the Euro Area," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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