Can Uncorrelated Shocks Generate Aggregate Autocorrelation?: Business Cycle Persistence in a Model with Endogenous Growth and Fluctuations

Chase Coleman and Kerk Phillips
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Chase Coleman: Stern School, New York University
Kerk Phillips: Department of Economics, Brigham Young University

No 2013-03, BYU Macroeconomics and Computational Laboratory Working Paper Series from Brigham Young University, Department of Economics, BYU Macroeconomics and Computational Laboratory

Abstract: This paper considers a model which incorporates Schumpeterian type growth into an otherwise standard RBC model similar to the one in Phillips & Wrase (2006). We consider a model with three sources of shocks. The first is a standard productivity shock. The second is a set of Schumpeterian innovation shocks which are industry specific and correspond to the results of an applied R&D process. The final shock is an aggregate shock to the stock of basic knowledge and arrives as a Poisson process with an arrival rate influenced by economy-wide spending on R&D. We show that this model is capable of generating an observed TFP series that is autocorrelated, even when the standard productivity shock is pure white noise.

Keywords: autocorrelation; dynamic stochastic general equilibrium; business cycles; technology persistence; Schumpeterian; economic growth; GDP; TFP (search for similar items in EconPapers)
JEL-codes: C63 E32 E37 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2013-08
New Economics Papers: this item is included in nep-dge and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:byu:byumcl:201303

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