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Growth, Slowdowns, and Recoveries

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  • Bianchi, Francesco
  • Kung, Howard

Abstract

We construct and estimate a model that features endogenous growth and technology diffusion. The spillover effects from research and development provide a link between business cycle fluctuations and long-term growth. Therefore, productivity growth is related to the state of the economy. Shocks to the marginal efficiency of investment explain the bulk of the low-frequency variation in growth rates. Transitory inflationary shocks lead to persistent declines in economic growth. During the Great Recession, technology diffusion dropped sharply, while long-term growth was not significantly affected. The opposite occurred during the 2001 recession. The growth mechanism induces positive comovement between consumption and investment.

Suggested Citation

  • Bianchi, Francesco & Kung, Howard, 2014. "Growth, Slowdowns, and Recoveries," CEPR Discussion Papers 10291, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10291
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    Cited by:

    1. Gianluca Benigno & Luca Fornaro, 2018. "Stagnation Traps," Review of Economic Studies, Oxford University Press, vol. 85(3), pages 1425-1470.
    2. de Ridder, Maarten, 2016. "Investment in productivity and the long-run effect of financial crises on output," LSE Research Online Documents on Economics 86180, London School of Economics and Political Science, LSE Library.
    3. Gauti B. Eggertsson & Neil R. Mehrotra & Sanjay R. Singh & Lawrence H. Summers, 2016. "A Contagious Malady? Open Economy Dimensions of Secular Stagnation," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(4), pages 581-634, November.
    4. repec:eee:moneco:v:93:y:2018:i:c:p:42-44 is not listed on IDEAS
    5. Tom Schmitz, 2016. "Endogenous Growth, Firm Heterogeneity and the Long-run Impact of Financial Crises," 2016 Meeting Papers 609, Society for Economic Dynamics.

    More about this item

    Keywords

    Bayesian methods; business cycles; DSGE model; endogenous growth; technology diffusion;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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