Endogenous Business Cycles and Growth

Wälde, Klaus

doi:10.2139/ssrn.396480

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Endogenous Business Cycles and Growth

32 Pages Posted: 21 Apr 2003

See all articles by Klaus Wälde

Klaus Wälde

University of Mainz; CESifo (Center for Economic Studies and Ifo Institute); UCL at Louvain la Neuve

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

Wälde, Klaus, Endogenous Business Cycles and Growth (April 2003). Available at SSRN: https://ssrn.com/abstract=396480 or http://dx.doi.org/10.2139/ssrn.396480