Some new insights on the empirics of Goodwin’s growth-cycle model

Ricardo Araujo and Marwil Dávila-Fernández

Department of Economics University of Siena from Department of Economics, University of Siena

Abstract: Vector Autoregressive (VAR) models have been used for a long time now to study profit-squeeze cycles, most of the time using problematic Hodrick-Prescott (HP) filtered time series. In a recent paper, Hamilton (2018) has provided a simple alternative that overcomes the main drawbacks of the HP procedure. In order to evaluate the empirical relevance of the profit-squeeze mechanism, we compare both methodologies using quarterly data for the United States from 1948-67 to 2016. Furthermore, we present an extension of Goodwin's (1967) growth-cycle model that includes employment rates, income distribution, and capacity utilisation as endogenous variables. We show analytically that the system always admits a family of periodic solutions. The model is estimated econometrically using the Autoregressive Distributed Lag (ARDL) approach. Through numerical simulations and making use of our estimations, we confirm that fluctuations are persistent and bounded.

Keywords: Distributive cycles; Growth-cycle; HP ?lter; VAR; ARDL. (search for similar items in EconPapers)
JEL-codes: E32 E64 (search for similar items in EconPapers)
Date: 2018-11
New Economics Papers: this item is included in nep-mac and nep-pke
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Journal Article: Some new insights on the empirics of Goodwin's growth-cycle model (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:usi:wpaper:790

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