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General Equilibrium Vintage Capital Growth Models Displaying Periodic Solutions : A Theoretical Example

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  • BOUCEKKINE, Raouf

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

  • GERMAIN, Marc

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

  • LICANDRO, Omar

    (FEDEA and Universidad Carlos III de Madrid)

Abstract

In a dynamic general equilibrium setup, this paper highlights the role of vintages and creative destruction in business fluctuations. By stressing the forward-looking characteristic of the optimal scrapping rule, we use a standard rational expectations argument to show the constancy of the scrapping function in a linear utility function framework. Secondly, we prove that equilibrium output shows a purely periodic behavior around an exponential growth trend, the pattern of the cycle being determined by the pattern of initial conditions. Actually, this paper points at the so-called echoe effects as a relevant economic fluctuations source, an issue rather neglected by theorists since the publication of Solow et alii (1966) seminal paper.

Suggested Citation

  • BOUCEKKINE, Raouf & GERMAIN, Marc & LICANDRO, Omar, 1996. "General Equilibrium Vintage Capital Growth Models Displaying Periodic Solutions : A Theoretical Example," LIDAM Discussion Papers CORE 1996032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1996032
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp1996.html
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    Cited by:

    1. Agust'n Pérez-Barahona & Benteng Zou, 2006. "Energy-saving technological progress in a vintage capital model," Chapters, in: Carlos de Miguel & Xavier Labanderia & Baltasar Manzano (ed.), Economic Modelling of Climate Change and Energy Policies, chapter 11, pages 166-179, Edward Elgar Publishing.
    2. Boucekkine, Raouf & Pommeret, Aude, 2004. "Energy saving technical progress and optimal capital stock: the role of embodiment," Economic Modelling, Elsevier, vol. 21(3), pages 429-444, May.
    3. Perez-Barahona, Agustin & Zou, Benteng, 2006. "A comparative study of energy saving technical progress in a vintage capital model," Resource and Energy Economics, Elsevier, vol. 28(2), pages 181-191, May.
    4. Raouf BOUCEKKINE & Aude POMMERET, 2000. "Optimal Capital Accumulation, Energy Cost and the Nature of Technological Progress," LIDAM Discussion Papers IRES 2001023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    5. Théophile, AZOMAHOU & Raouf, BOUCEKKINE & Phu, NUYEN VAN, 2003. "Energy consumption, technological progress and economic policy," LIDAM Discussion Papers IRES 2003025, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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