Continuous-Time Estimation of an Endogenous Growth Model of an Open Economy

Most recent theoretical research on endogenous economic growth has been conducted with continuous-time models that embody the assumption of an intertemporally optimizing representative agent. Yet virtually none of these models has been confronted with empirical data. In this paper we make use of a model of an open economy recently develop by Turnovsky to demonstrate one approach to the estimation and analysis of such models. We present the results of the estimation, analyze the estimated model's stability properties around its steady-state solution, and explore the model's behavior in response to alternative tax policies