Moreover, the hypothesis of linearity of the adjustment towards long-run equilibrium is rejected in favor of a logistic smooth transition autoregressive process. For a sample of five major industrial countries, we find, that in most cases, the general price level rises more readily than it falls. In a stochastic setting, however, the desire for accumulation affects growth in more complicated ways. An increase in the capitalist spirit always reduces the rate of time preference, but it may increase or decrease risk aversion. In turn, growth may accelerate or decelerate, depending upon consumers' willingness to substitute over time, and upon the range of investments in the economy.
Population varies endogenously according to the theory of demographic transition.
The latter may be a Malthusian stationary steady-state or a limit cycle. Strong fluctuations in the demoeconomic variables, which can be observed for some developing countries, can be explained as endogenous oscillations. Positive exogenous shocks may cause an escape from the equilibrium trap and initiate a process of demographic transition if they are properly timed and of sufficient duration. Furthermore, the VAR models are analyzed using innovation accounting.