Adding cycles into the neoclassical growth model

Michael Donadelli, Antonio Paradiso () and G. Livieri

Economic Modelling, 2019, vol. 78, issue C, 162-171

Abstract: We propose a stochastic Solow growth model where a cyclical component is added to the total factor productivity process. Theoretically, an important feature of the model is that its main equation takes a state space representation where key parameters can be estimated via an unobserved component approach without involving capital stock measures. In addition, the dynamic properties of the model are mostly unaffected by the newly introduced cyclical component. Empirically, our novel framework is consistent with secular U.S. empirical evidence.

Keywords: Stochastic growth model; Cyclical fluctuations; Unobserved component approach (search for similar items in EconPapers)
JEL-codes: C32 E32 O40 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:78:y:2019:i:c:p:162-171

DOI: 10.1016/j.econmod.2018.09.018

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