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Endogenous growth cycles

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  • Klaus, WAELDE

    (European Commission-Brussels and University of Dresden-Germany and CESifo and IRES-Université Catholique de Louvain)

Abstract

Current explanations why a growing economy necessarily goes through periods of high and low growth predict countercyclical R&D investment. As this is very controversial from an empirical perspective, a stochastic Poisson model of endogenous growth cycles is presented where the determinants of the cyclical behaviour of R&D investment are analytically studied. Providing an explicit expression for the expected length of a cycle shows that high frequency fluctuations can indeed be understood by this approach. It is also shown how small technological improvements translate into large aggregate fluctuations.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2004012.

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Length: 27
Date of creation: 01 Aug 2003
Date of revision: 15 Mar 2004
Handle: RePEc:ctl:louvir:2004012

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Keywords: Endogenous fluctuations and growth; Continuous time uncertainty;

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