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How much Keynes and how much Schumpeter? An Estimated Macromodel of the US Economy

Cozzi, Guido and Pataracchia, Beatrice and Ratto, Marco and Pfeiffer, Philipp (2017): How much Keynes and how much Schumpeter? An Estimated Macromodel of the US Economy.

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Abstract

This paper quantitatively assesses the relative importance of demand and supply-side factors in the recent slowdown of US growth. For this purpose, we estimate a DSGE model with heterogeneous firms and endogenous Schumpeterian growth. We find that Keynesian fluctuations in risk premia and savings behavior drive the recession. However, our results challenge the view that the slump is a pure demand-side phenomenon. Adverse supply-side factors such as reduced technological spillovers from frontier innovations have also shaped growth dynamics and emerged well before the financial turmoil.

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