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Schumpeterian Foundations of Real Business Cycles

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  • Galo Nuño Barrau

    (Research Department, Banco Bilbao Vizcaya Argentaria)

Abstract

Technology shocks are at the core of real business cycle models. Although tra- ditionaly described as exogenous, technology shocks can be the result of the endoge- nous decisions by economic agents under uncertainty. To demostrate it, in this paper I develop a dynamic stochastic general equilibrium model that incorporates Schum- peterian endogenous growth features that affect the convergence to the steady-state. In this model, technology advances are due to the introduction of vertical innovations by entrepreneurs who try to become monopolists in different economic sectors. En- trepreneurs? ventures are ?nanced by banks. The model is solved and estimated by bayesian methods for the United States economy to compute the value of some of its structural parameters. Results show that for a country close to the technology fron- tier, the presented innovation mechanism is roughly equivalent in terms of volatilies, correlations and impulse responses to technology shocks in real business cycle mod- els. Therefore, the behavior of the productivity can be due not only to technology considerations but also to ?nancial and entrepreneurial reasons.

Suggested Citation

  • Galo Nuño Barrau, 2008. "Schumpeterian Foundations of Real Business Cycles," Working Papers 0805, International Economics Institute, University of Valencia.
  • Handle: RePEc:iei:wpaper:0805
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    References listed on IDEAS

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    Cited by:

    1. Giulioni, Gianfranco, 2010. "Endogenous recessions: The creative destruction effect of final product novelty," Economic Modelling, Elsevier, vol. 27(2), pages 516-522, March.

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    More about this item

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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