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Cyclical Features of Uzawa-Lucas Endogenous Growth Model

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  • Restrepo Ochoa, Sergio I.
  • Vázquez Pérez, Jesús

Abstract

This paper analyzes the cyclical properties of a generalized version of Uzawa-Lucas endogenous growth model. We study the dynamic features of different cyclical components of this model characterized by a variety of decomposition methods. The decomposition methods considered can be classified in two groups. On the one hand, we consider three statistical filters: the Hodrick-Prescott filter, the Baxter-King filter and Gonzalo-Granger decomposition. On the other hand, we use four model-based decomposition methods. The latter decomposition procedures share the property that the cyclical components obtained by these methods preserve the log-linear approximation of the Euler-equation restrictions imposed by the agent’s intertemporal optimization problem. The paper shows that both model dynamics and model performance substantially vary across decomposition methods. A parallel exercise is carried out with a standard real business cycle model. The results should help researchers to better understand the performance of Uzawa-Lucas model in relation to standard business cycle models under alternative definitions of the business cycle.

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Bibliographic Info

Paper provided by University of the Basque Country - Department of Foundations of Economic Analysis II in its series DFAEII Working Papers with number 2002-30.

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Date of creation: Jul 2002
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Handle: RePEc:ehu:dfaeii:200230

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Postal: Dpto. de Fundamentos del Análisis Económico II, = Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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Keywords: endogenous growth; decomposition methods; cyclical features;

References

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  1. Gary D. Hansen, 1989. "Technical Progress and Aggregate Fluctuations," UCLA Economics Working Papers 546, UCLA Department of Economics.
  2. Greenwood, J. & Hercowitz, Z., 1991. "The Allocation of Capital and Time Over the Business Cycles," UWO Department of Economics Working Papers 9104, University of Western Ontario, Department of Economics.
  3. King, Robert G. & Plosser, Charles I. & Stock, James H. & Watson, Mark W., 1991. "Stochastic Trends and Economic Fluctuations," American Economic Review, American Economic Association, vol. 81(4), pages 819-40, September.
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  8. Lawrence H. Summers, 1986. "Some skeptical observations on real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 23-27.
  9. Paul Gomme, 1991. "Money and growth revisited," Discussion Paper / Institute for Empirical Macroeconomics 55, Federal Reserve Bank of Minneapolis.
  10. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
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  13. Uhlig, H., 1995. "A toolkit for analyzing nonlinear dynamic stochastic models easily," Discussion Paper 1995-97, Tilburg University, Center for Economic Research.
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  15. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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  17. Ladron-de-Guevara, Antonio & Ortigueira, Salvador & Santos, Manuel S., 1997. "Equilibrium dynamics in two-sector models of endogenous growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 115-143, January.
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  21. Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-18.
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  28. repec:fth:simfra:93-03 is not listed on IDEAS
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