Business Cycle Persistence in a Model with Schumpeterian Growth and Uncorrelated Shocks

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

No 2014-01, BYU Macroeconomics and Computational Laboratory Working Paper Series from Brigham Young University, Department of Economics, BYU Macroeconomics and Computational Laboratory

Abstract: This paper explores the merits of a DSGE model incorporating Schumpeterian type growth into an otherwise standard RBC model similar to the one in Phillips and Wrase (2006). We consider a model with two exogenous shocks. The first is a standard productivity shock. The second 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 both an observed total factor productivity and GDP series that is autocorrelated, even when all the shock processes are serially uncorrelated. We present empirical evidence that the driving process in our model is consistent with the behavior of the U.S. economy

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: 59 pages
Date: 2014-02
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-gro, nep-mac and nep-sog
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:byu:byumcl:201401

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