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Gomes, O. (2009). On the stability of endogenous growth models: an evaluation of the agents' response to output fluctuations. Journal of Economic Studies. 36 (1), 17-35
O. M. Gomes, "On the stability of endogenous growth models: an evaluation of the agents' response to output fluctuations", in Journal of Economic Studies, vol. 36, no. 1, pp. 17-35, 2009
@article{gomes2009_1715940094214, author = "Gomes, O.", title = "On the stability of endogenous growth models: an evaluation of the agents' response to output fluctuations", journal = "Journal of Economic Studies", year = "2009", volume = "36", number = "1", doi = "10.1108/01443580910923786", pages = "17-35", url = "http://www.emeraldinsight.com/doi/abs/10.1108/01443580910923786" }
TY - JOUR TI - On the stability of endogenous growth models: an evaluation of the agents' response to output fluctuations T2 - Journal of Economic Studies VL - 36 IS - 1 AU - Gomes, O. PY - 2009 SP - 17-35 SN - 0144-3585 DO - 10.1108/01443580910923786 UR - http://www.emeraldinsight.com/doi/abs/10.1108/01443580910923786 AB - Purpose - The purpose of this paper is to present three modified versions of the simple AK endogenous growth model. Design/methodology/approach - Such frameworks stress the role of consumers' sentiment, the impact of fiscal policy and the effect of non-optimal investment decisions made by firms. In all the cases, today's decisions take into consideration the economic performance of the previous period; in the first case, households react pro-cyclically to the output path; in the second case, a counter-cyclical fiscal policy is considered; and in the third case, firms adopt a pro-cyclical behavior concerning investment choices. Findings - The author studies the stability properties of the three models and concludes that, on each one of them, a saddle-path stable equilibrium exists. Originality/value - The paper accentuates the relevance of the reaction of the economic agents relatively to the business cycle. By assuming that the behavior of consumers, government and firms is a behavior of reaction to economic fluctuations, we find interesting and relevant results in what concerns the conventional intertemporal optimization growth model. ER -