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Is Schumpeterian "Creative Destruction" a Plausible Source of Endogenous Real Business Cycle Shocks? Author info | Abstract | Publisher info | Download info | Related research | Statistics Kerk L. Phillips (Brigham Young University)
Jeff Wrase (U.S. Senate Joint Economic Committee)
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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. Our fundamental question is, can Schumpeter’s creative destruction process which leads to technological improvement over time also generate realistic 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 artificial 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 at least as capable of accounting for key features of fluctuations at various frequencies as a model with exogenous technology shocks. Moreover, the model can do so without relying as heavily on a highly persistent generating process for such exogenous shocks as standard models must.
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Paper provided by EconWPA in its series GE, Growth, Math methods with number
0304001.
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Length: 33 pages
Date of creation: 16 Apr 2003Date of revision:
Handle: RePEc:wpa:wuwpge:0304001Note: Type of Document - PDF; pages: 33Contact details of provider: Web page: http://129.3.20.41
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Keywords: Schumpeter ; growth ; cycles ; real business cycles ; Other versions of this item:
Find related papers by JEL classification: E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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