Inspecting the Mechanism: An Analytical Approach to the Stochastic Growth Model

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Inspecting the Mechanism: An Analytical Approach to the Stochastic Growth Model

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Title: Inspecting the Mechanism: An Analytical Approach to the Stochastic Growth Model
Author: Campbell, John
Citation: Campbell, John Y. 1994. Inspecting the Mechanism: An Analytical Approach to the Stochastic Growth Model. Journal of Monetary Economics 33, no. 3: 463-506.
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Abstract: This paper argues that a clear understanding of the stochastic growth model can best be achieved by working out an approximate analytical solution. The proposed solution method replaces the true budget constraints and Euler equations of economic agents with loglinear approximations. The model then becomes a system of loglinear expectational difference equations, which can be solved by the method of undetermined coefficients. The paper uses this technique to study shocks to techno- logy and shocks to government spending financed by lump-sum or distortionary taxation. It emphasizes that the persistence of shocks is an important determinant of their macroeconomic effects.
Published Version: http://dx.doi.org/10.1016/0304-3932(94)90040-X
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:3196342
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