Can Uncorrelated Shocks Generate Aggregate Autocorrelation?: Business Cycle Persistence in a Model with Endogenous Growth and Fluctuations
AbstractThis paper considers a model which incorporates Schumpeterian type growth into an otherwise standard RBC model similar to the one in Phillips & Wrase (2006). We consider a model with three sources of shocks. The first is a standard productivity shock. The second is a set of Schumpeterian innovation shocks which are industry specific and correspond to the results of an applied R&D process. The final shock is an aggregate shock to the stock of basic knowledge and arrives as a Poisson process with an arrival rate influenced by economy-wide spending on R&D. We show that this model is capable of generating an observed TFP series that is autocorrelated, even when the standard productivity shock is pure white noise.
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Bibliographic InfoPaper provided by Brigham Young University, Department of Economics, BYU Macroeconomics and Computational Laboratory in its series BYU Macroeconomics and Computational Laboratory Working Paper Series with number 2013-03.
Length: 19 pages
Date of creation: Aug 2013
Date of revision:
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autocorrelation; dynamic stochastic general equilibrium; business cycles; technology persistence; Schumpeterian; economic growth; GDP; TFP;
Find related papers by JEL classification:
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-31 (All new papers)
- NEP-DGE-2013-08-31 (Dynamic General Equilibrium)
- NEP-MAC-2013-08-31 (Macroeconomics)
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