Consumer confidence, endogenous growth and endogenous cycles

Orlando Gomes

MPRA Paper from University Library of Munich, Germany

Abstract: Endogenous growth models are generally designed to address long term trends of growth. They explain how the economy converges to or diverges from a balanced growth path and they characterize aggregate behaviour given the optimization problem faced by a representative agent that maximizes consumption utility. In such frameworks, only potential output matters and all decisions, by firms and households, are taken assuming that any output gap does not interfere with the agents’ behaviour. In this paper, we develop growth models (without and with optimization) that depart from the conventional framework in the sense that consumption decisions take into account output fluctuations. Households will raise their propensity to consume in periods of expansion and they will lower it in phases of recession. Such a framework allows to introduce nonlinear features into the model, making it feasible to obtain, for reasonable parameter values, endogenous fluctuations. These are triggered by a Neimark-Sacker bifurcation.

Keywords: Endogenous growth; Endogenous business cycles; Nonlinear dynamics; Neimark-Sacker bifurcation (search for similar items in EconPapers)
JEL-codes: C61 E32 O41 (search for similar items in EconPapers)
Date: 2007-01
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Consumer confidence, endogenous growth and endogenous cycles (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:2883

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