Abstract:
This paper offers a comprehensive study on transitional dynamics within R&D-based models of endogenous growth. There are two main motivations. First, the complete dynamic system for the market solution is derived in general form. Second, using this dynamic system as a unifying framework the adjustment process is analysed. In order to answer the question for the relative importance of transitional dynamics vis-à-vis balanced-growth dynamics, special emphasis is given to the rate of convergence. The investigations show that the models under study can reproduce empirically relevant pattern of development including over- and undershooting as well as growth cycles. The paper demonstrates an alternative route to growth cycles, which does not require complex eigenvalues.
