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How much Keynes and how much Schumpeter?

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  • Cozzi, Guido
  • Pataracchia, Beatrice
  • Pfeiffer, Philipp
  • Ratto, Marco

Abstract

This paper quantitatively assesses the relative importance of demand and supply factors in the recent slowdown of US growth. For this purpose, we estimate a DSGE model with heterogeneous firms and endogenous Schumpeterian growth. We find that Keynesian fluctuations in risk premia and savings behavior drive the recession. However, our results challenge the view that the slump is a pure demand-side phenomenon. Adverse supply-side factors such as reduced technological spillovers from frontier innovations have also shaped growth dynamics and emerged well before the financial turmoil.

Suggested Citation

  • Cozzi, Guido & Pataracchia, Beatrice & Pfeiffer, Philipp & Ratto, Marco, 2021. "How much Keynes and how much Schumpeter?," European Economic Review, Elsevier, vol. 133(C).
  • Handle: RePEc:eee:eecrev:v:133:y:2021:i:c:s0014292121000131
    DOI: 10.1016/j.euroecorev.2021.103660
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    Cited by:

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    3. Giovannini, Massimo & Pfeiffer, Philipp & Ratto, Marco, 2021. "Efficient and robust inference of models with occasionally binding constraints," Working Papers 2021-03, Joint Research Centre, European Commission (Ispra site).

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    More about this item

    Keywords

    Endogenous growth; R&D; Schumpeterian growth; Bayesian estimation;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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