Growth, Slowdowns, and Recoveries

39 Pages Posted: 16 Mar 2015 Last revised: 11 Apr 2015

See all articles by Francesco Bianchi

Francesco Bianchi

Duke University

Howard Kung

London Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: November 1, 2014

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.

Keywords: DSGE model, Endogenous growth, Technology Diffusion, Business cycles, Bayesian Methods

Suggested Citation

Bianchi, Francesco and Kung, Howard, Growth, Slowdowns, and Recoveries (November 1, 2014). Economic Research Initiatives at Duke (ERID) Working Paper No. 184. Available at SSRN: https://ssrn.com/abstract=2577505 or http://dx.doi.org/10.2139/ssrn.2577505

Francesco Bianchi (Contact Author)

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Howard Kung

London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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