Using stochastic growth models to understand unit roots and breaking trends

Article Abstract:

The economic basis for econometric models of unit roots and breaking trends proved that in an endogenous growth model, difference stationarity is existent in all growing variable. This concept is produced by the diffusion mechanism of the model. An exogenous growth model may present either difference stationarity or trend stationarity, influenced by the nature of external impulses. Long-run growth rates pertain to permanent changes in economic fundamentals that result in segmented trends in endogenous growth models, but only shifting trends in exogenous growth models.

Economics, Research and Development in the Social Sciences and Humanities, Usage, Stochastic analysis

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Growth and research and development

Article Abstract:

The promotion of technological innovation has been a main concern among governments. The generation of general knowledge and industry research have long been supported by governments historically. The optimal government policy is evaluated in relation to general and specific R&D. Its relation to economic growth is also studied. These two types of R&D are differentiated by the construction of an endogenous growth model. A correct subsidy mix for both general and specific R&D will increase the growth rate.

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Composition of R&D and technological cycles

Article Abstract:

A general framework is used to explain the occurrence of 'technological cycles' that are endogenously generated by tradeoffs between research and development intrinsic in the technological components of industrial research production. The results of the analysis indicate that profit-maximizing behavior results in a fluctuating optimal trajectory.

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