Title: A full test of a Romer's endogenous growth model

Authors: Pedro J. Gutiérrez

Addresses: Dpto. de Fundamentos del Análisis Económico e Historia e Instituciones Económicas, Facultad de CC.EE. y EE., Universidad de Valladolid, Avda. Valle Esgueva, 6, 47011 Valladolid, Spain

Abstract: It is widely accepted by theoretical and empirical economists that growth and fluctuations are the two sides of a unique dynamic evolution of the economy that, consequently, must be studied with identical analytical tools and techniques. Indeed, both business cycle theory and growth theory make use of the same type of dynamic general equilibrium models and share statistical and econometric procedures. However, unlike business cycle models, in which calibration and simulation have a long and successful tradition, growth models have scarcely applied these interesting and fruitful techniques. This paper overcomes this inconvenience by designing a fully specified Romer endogenous growth model, completely micro-founded, that turns into an AK model susceptible of calibration and simulation, and that allows the stylised facts of growth to be explained. When applied to the US economy, the proposed model provides a good fit to the empirical data.

Keywords: stochastic general equilibrium models; Romer; endogenous growth model; poverty trap; calibration; simulation.; US economy; USA; United States

DOI: 10.1504/IJEBR.2015.072502

International Journal of Economics and Business Research, 2015 Vol.10 No.4, pp.297 - 325

Received: 20 May 2015
Accepted: 21 Jul 2015
Published online: 15 Oct 2015 *

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