Adding cycles into the neoclassical growth model |
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| Affiliation: | 1. Department of Economics, “Ca'' Foscari" University of Venice, Italy;2. Research Center SAFE, Goethe University Frankfurt, Germany;3. Scuola Normale Superiore, Pisa, Italy;1. Department of Mathematics, University of Zagreb, Bijenička 30, Zagreb, Croatia;2. Faculty of Mining, Geology and Petroleum Engineering, University of Zagreb, Pierottijeva 6, Zagreb, Croatia;1. A.I. Alikhanyan National Science Laboratory, 0036 Yerevan, Armenia;2. Departamento de Ciencias Exatas, Universidade Federal de Lavras, CP 3037, 37200-000 Lavras-MG, Brazil;3. Dipartimento di Scienza e Alta Tecnologia, Universitá degli Studi dell’Insubria, Via Valleggio 11, 22100 Como, Italy;4. I.N.F.N. Sezione di Milano, Via Celoria 16, 20133 Milano, Italy;5. Laboratoire Interdisciplinaire Carnot de Bourgogne, UMR CNRS 6303, Université de Bourgogne, 21078 Dijon Cedex, France;6. Institute for Physical Research, 0203 Ashtarak-2, Armenia;1. Aix Marseille Université, CNRS, Centrale Marseille, I2M, Marseille, France;2. University of Waterloo, Canada |
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| Abstract: | We propose a stochastic Solow growth model where a cyclical component is added to the total factor productivity process. Theoretically, an important feature of the model is that its main equation takes a state space representation where key parameters can be estimated via an unobserved component approach without involving capital stock measures. In addition, the dynamic properties of the model are mostly unaffected by the newly introduced cyclical component. Empirically, our novel framework is consistent with secular U.S. empirical evidence. |
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| Keywords: | Stochastic growth model Cyclical fluctuations Unobserved component approach O40 E32 C32 |
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