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Some new insights on the empirics of Goodwin’s growth-cycle model

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  • Ricardo A. Araújo
  • Marwil J. Dávila-Fernández

Abstract

Vector Autoregressive (VAR) models have been used for a long time now to study profit-squeeze cycles, most of the time using problematic Hodrick-Prescott (HP) filtered time series. In a recent paper, Hamilton (2018) has provided a simple alternative that overcomes the main drawbacks of the HP procedure. In order to evaluate the empirical relevance of the profit-squeeze mechanism, we compare both methodologies using quarterly data for the United States from 1948-67 to 2016. Furthermore, we present an extension of Goodwin's (1967) growth-cycle model that includes employment rates, income distribution, and capacity utilisation as endogenous variables. We show analytically that the system always admits a family of periodic solutions. The model is estimated econometrically using the Autoregressive Distributed Lag (ARDL) approach. Through numerical simulations and making use of our estimations, we confirm that fluctuations are persistent and bounded.

Suggested Citation

  • Ricardo A. Araújo & Marwil J. Dávila-Fernández, 2018. "Some new insights on the empirics of Goodwin’s growth-cycle model," Department of Economics University of Siena 790, Department of Economics, University of Siena.
    • Handle: RePEc:usi:wpaper:790
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    Cited by:

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    2. Robert A. Blecker & Mark Setterfield, 2020. "On multi-sector and multi-technique models, production functions and Goodwin cycles: a reply to Libman," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 17(3), pages 295-306, November.
    3. Sasaki, Hiroaki & Asada, Yasukuni & Sonoda, Ryunosuke, 2024. "Effects of Minimum Wage Share and Wage Gap Reduction on Cyclical Fluctuation: A Goodwin Approach," MPRA Paper 121695, University Library of Munich, Germany.
    4. Cajas Guijarro, John, 2023. "An Extended Goodwin Model with Endogenous Technical Change: Theory and Simulation for the US Economy (1960-2019)," MPRA Paper 118878, University Library of Munich, Germany.
    5. Cajas Guijarro, John & Vera, Leonardo, 2022. "The macrodynamics of an endogenous business cycle model of marxist inspiration," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 566-585.
    6. Stamegna, Marco, 2022. "Induced innovation, the distributive cycle, and the changing pattern of labour productivity cyclicality: a SVAR analysis for the US economy," MPRA Paper 113855, University Library of Munich, Germany.
    7. Cajas Guijarro, John, 2023. "A Classical Marxian Two-Sector Endogenous Cycle Model: Integrating Marx, Dutt, and Goodwin," MPRA Paper 118665, University Library of Munich, Germany.
    8. Gilberto Tadeu Lima & Andre M. Marques, 2022. "Demand and Distribution in a Dynamic Spatial Panel Model for the United States: Evidence from State-Level Data," Working Papers, Department of Economics 2022_21, University of São Paulo (FEA-USP), revised 05 Oct 2022.

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    More about this item

    Keywords

    Distributive cycles; Growth-cycle; HP ?lter; VAR; ARDL.;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy

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