We construct a rational expectations model in which aggregate growth alternates between a low growth and a high growth state. When all agents expect growth to be slow, the returns on investment are low, and little investment takes place. This slows growth and confirms the prediction that the...

A Schumpeterian process of creative destruction can induce a rational herd behavior by entrepreneurs across various sectors of the economy that may look like it is fuelled by "animal spirits." Across cyclical economies, a negative relationship emerges between volatility and growth, and the...

We present a class of convex endogenous growth models and analyze their performance in terms of both growth and business cycle criteria. The models we study have close analogs in the real business cycle literature. We interpret the exogenous growth rate of productivity as an endogenous growth...