How much Keynes and how much Schumpeter?

This paper quantitatively assesses the relative importance of demand and supply factors in the recent slowdown of US growth. For this purpose, we estimate a DSGE model with heterogeneous firms and endogenous Schumpeterian growth. We find that Keynesian fluctuations in risk premia and savings behavior drive the recession. However, our results challenge the view that the slump is a pure demand-side phenomenon. Adverse supply-side factors such as reduced technological spillovers from frontier innovations have also shaped growth dynamics and emerged well before the financial turmoil. (C) 2021 Elsevier B.V. All rights reserved.