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Publication Detailed Description
On the stability of endogenous growth models: an evaluation of the agents' response to output fluctuations
Journal Title
Journal of Economic Studies
Year (definitive publication)
2009
Language
English
Country
United Kingdom
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Abstract
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.
Acknowledgements
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Keywords
Consumer behaviour,Fiscal policy,Investments
Fields of Science and Technology Classification
- Economics and Business - Social Sciences
Funding Records
Funding Reference | Funding Entity |
---|---|
POCT/ECO/48628/2002 | Fundação para a Ciência e a Tecnologia |