This paper presents a model in which the realizations of stochastic tax and
depreciation rates determine both the level and growth rate of output:
externalities to investment - learning by watching - are characterized by
diminishing returns, yielding a nonlinear "technical progress function". This
results in multiple steady-state growth rates. History matters. It is
possible that two economies with identical "deep" parameters and initial
capital stocks may cycle around different trend growth rates, depending upon
the historical path of fiscal shocks. Growth and cycles interact, and the
nonlinearity means that output changes cannot be decomposed into a stochastic
trend and a trend-stationary process.
In order to set up a list of libraries that you have access to,
you must first login
or sign up.
Then set up a personal list of libraries from your profile page by
clicking on your user name at the top right of any screen.