NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Gonzalo Morales

Alberta School of Business
University of Alberta
2-32C Business Building
Edmonton, AB T6G 2R6
Canada
Canada
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NBER Working Papers and Publications

December 2014Growth, Slowdowns, and Recoveries
with Francesco Bianchi, Howard Kung: w20725
We construct and estimate an endogenous growth model with debt and equity financing frictions to understand the relation between business cycle fluctuations and long-term growth. The presence of spillover effects from R&D imply an endogenous relation between productivity growth and the state of the economy. During the 2008 recession, technology utilization dropped precipitously, while R&D investment and long-term TFP growth were less affected. The opposite occurred during the 2001 re- cession. Contractionary shocks to external equity and debt financing are important for explaining the dynamics of the 2001 and 2008 recessions, respectively. Equity financing shocks are more important for explaining R&D investment while debt financing shocks are more important for physical investment.
 
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