Home Production and the Persistence of Business Cycles

Roberto Perli

Home Pages from University of Pennsylvania

Abstract: This paper presents a business cycle model with a propagation mechanism capable of generating persistence of output growth comparable to that observed in the U.S. data. The key is that in this model consumption and labor move together not only at the impact of a shock, but also for a few periods after that; this can happen if there are sufficient increasing returns to make the equilibrium indeterminate. The exact degree of increasing returns is estimated so that the distance between the spectra of the model and U.S. output growth is minimized.

Date: 1995-12-14
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Persistent link: https://EconPapers.repec.org/RePEc:wop:pennhp:_043

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