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Schumpeterian Growth and Endogenous Business Cycles

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  • Kerk L. Phillips

    (Brigham Young University)

Abstract

This paper looks at the linkages between growth and business cycles by bringing together two strands of literature. We incorporate a quality ladders engine of growth into an otherwise standard real business cycle model. We are interested in whether the process which leads to technological improvement over time, is also a good candidate for the process which leads to business cycles. We use a standard real business cycle approach to solve for rules of motion in our state variables and proceed to generate artificial time series. We compare the statistical properties of these series with their historical counterparts to determine if the model mimics the real world closely. One advantage our approach has over the standard approach is that the trend component is included in our artifical series just as it is in the data. Hence, we are not tied to any particular filtering method when we compare simulations with the real world data. Quantitative analysis reveals the model is capable of accounting for key features of fluctuations at various frequencies. Moreover, the model can do so without relying as heavily on highly persistent exogenous shocks as standard models must.

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0706.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:0706

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  1. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, American Economic Association, vol. 80(5), pages 1077-91, December.
  2. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 8904, University of Western Ontario, Department of Economics.
  3. Ozlu, Elvan, 1996. "Aggregate economic fluctuations in endogenous growth models," Journal of Macroeconomics, Elsevier, Elsevier, vol. 18(1), pages 27-47.
  4. Grossman, G.M. & Helpman, E., 1989. "Quality Ledders In The Theory Of Growth," Papers, Princeton, Woodrow Wilson School - Public and International Affairs 148, Princeton, Woodrow Wilson School - Public and International Affairs.
  5. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  6. David Andolfatto & Glenn MacDonald, 1998. "Technology Diffusion and Aggregate Dynamics," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 338-370, April.
  7. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, Econometric Society, vol. 50(6), pages 1345-70, November.
  8. Don E. Schlagenhauf & Jeffrey M. Wrase, 1992. "Liquidity and real activity in a simple open economy model," Discussion Paper / Institute for Empirical Macroeconomics, Federal Reserve Bank of Minneapolis 57, Federal Reserve Bank of Minneapolis.
  9. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(1), pages 39-69, February.
  10. Canova, Fabio, 1993. "Detrending and Business Cycle Facts," CEPR Discussion Papers, C.E.P.R. Discussion Papers 782, C.E.P.R. Discussion Papers.
  11. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  12. Collard, Fabrice, 1998. "Spectral and persistence properties of cyclical growth," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 23(3), pages 463-488, November.
  13. Scott Freeman & Dong-Pyo Hong & Dan Peled, 1999. "Endogenous Cycles and Growth with Indivisible Technological Developments," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(2), pages 402-432, April.
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Cited by:
  1. Michael R. Pakko, 2005. "Changing technology trends, transition dynamics and growth accounting," Working Papers, Federal Reserve Bank of St. Louis 2000-014, Federal Reserve Bank of St. Louis.

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