Modelling Tails of Aggregated Economic Processes in a Stochastic Growth Model

Stéphane Auray, Aurélien Eyquem and Frédéric Jouneau-Sion ()
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Frédéric Jouneau-Sion: Université de Lille

No 2012-29, Working Papers from Center for Research in Economics and Statistics

Abstract: We present an annual sequence of wages in England starting in 1245. We show that a standard AK-type growth model with capital externality and stochastic productivity shocks is unable to explain important features of the data. We then consider random returns to scale. Moderate episodes of increasing returns to scale and growth are shown to be compatible with stationarity. Further, random returns to scale generate heteroskedasticity, a feature common to macroeconomic time series. Third, stationary distributions display fat tails if returns to scale are episodically increasing. We provide several inference results to support randomness of returns to scale.

Keywords: Economic growth; Unified growth theory; Heteroskedasticity; Fat tails (search for similar items in EconPapers)
JEL-codes: C22 C46 N13 O41 O47 (search for similar items in EconPapers)
Pages: 30
Date: 2012-10
New Economics Papers: this item is included in nep-dge, nep-eff, nep-fdg and nep-ore
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Related works:
Journal Article: Modeling tails of aggregate economic processes in a stochastic growth model (2014)
Working Paper: Modelling Tails of Aggregated Economic Processes in a Stochastic Growth Model (2014)
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