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Endogenous Business Cycles and Growth

  • Klaus Wälde

Current explanations why a growing economy necessarily goes through booms and recessions predict countercyclical R&D investment. As this is very controversial from an empirical perspective, a stochastic Poisson model of endogenous business cycles and growth is presented where the determinants of the cyclical behaviour of R&D investment are analytically studied. Providing an explicit expression for the expected length of a cycle shows that high frequency fluctuations can indeed be understood by this approach. It is also shown how small technological improvements translate into large aggregate fluctuations.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2003/wp-cesifo-2003-04/cesifo_wp920.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 920.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_920
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