The macroeconomic experience of the last decade stressed the
importance of jointly studying the growth and business cycle fluctuations behavior of the economy. To analyze this issue, we embed a model of Schumpeterian growth into an estimated medium-scale DSGE model. Results from a Bayesian estimation suggest that Investment risk premia are a key driver of the slump following the Great Recession. Endogenous innovation dynamics amplifies financial
crises and helps explain the slow recovery. Moreover, financial conditions also account for a substantial share of R&D Investment dynamics