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A NOTE ON ENDOGENOUS PROPAGATION IN ONE-SECTOR BUSINESS CYCLE MODELS WITH DYNAMIC COMPLEMENTARITIES

Published online by Cambridge University Press:  13 November 2012

Mao-Wei Hung  and
Shue-Jen Wu
Mao-Wei Hung*
Affiliation:
National Taiwan University
Shue-Jen Wu
Affiliation:
National Chi Nan University
*
Address correspondence to: Professor Mao-Wei Hung, No. 1, Sec. 4, Roosevelt Rd., Taipei City 106, Taiwan, Republic of China; e-mail: [email protected].
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Abstract

When the production function includes dynamic complementarities and a Cobb--Douglas form, dynamic complementarities are an endogenous propagation mechanism of shocks. The proposed model explains several stylized facts of aggregate variables of interest, including (i) hump-shaped impulse response functions, (ii) positively autocorrelated growth rates of aggregate variables, and (iii) correlation coefficients of forecastable movements in aggregate variables.

Keywords

Business CycleEndogenous PropagationDynamic ComplementaritiesHump-Shaped Impulse-Response Function
Type
Notes
Information
Macroeconomic Dynamics , Volume 16 , Issue 5 , November 2012 , pp. 791 - 801
Copyright
Copyright © Cambridge University Press 2012

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