Endogenous Business Cycles and Growth
32 Pages Posted: 21 Apr 2003
Date Written: April 2003
Abstract
Current explanations of why a growing economy necessarily goes through booms and recessions predict a 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.
Keywords: Endogenous Fluctuations and Growth, Uncertainty Under Continuous Time
JEL Classification: E32, O41
Suggested Citation: Suggested Citation
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