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Trend analysis in two standard growth models

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Author Info
Sergio Restrepo () (Universidad de Antioquia)
Jesús Vazquez () (Universidad del País Vasco)

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Abstract

This paper analyzes the trend processes characterized by two standard growth models using simple econometrics. The first model is the basic neoclassical growth model that postulates a deterministic trend for output. The second model is the Uzawa-Lucas model that postulates a stochastic trend for output. The aim is to understand how the different trend processes for output assumed by these two standard growth models determine the ability of each model to explain the observed trend processes of other macroeconomic variables such as consumption and investment. The results show that the two models reproduce the output trend process. Moreover, the results show that the basic growth model captures properly the consumption trend process, but fails in characterizing the investment trend process. The reverse is true for the Uzawa-Lucas model.

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Paper provided by University of the Basque Country - Department of Foundations of Economic Analysis II in its series DFAEII Working Papers with number 200231.

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Date of creation: 24 Sep 2003
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Handle: RePEc:ehu:dfaeii:200231

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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: basic neoclassical growth model Uzawa-Lucas model trend process cointegration

References listed on IDEAS
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  8. repec:fth:simfra:93-03 is not listed on IDEAS
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