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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.

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File URL: http://alfresco.uclouvain.be/alfresco/download/attach/workspace/SpacesStore/062e3106-5fa6-488b-b26c-3d64b7002db1/coredp_1996_32.pdf
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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1996032.

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Date of creation: 01 Jun 1996
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Handle: RePEc:cor:louvco:1996032

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Cited by:
  1. 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.
  2. 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.
  3. Agustin, PEREZ-BARAHONA & Benteng, ZOU, 2003. "Energy Saving Technological Progress in a Vintage Capital Model," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003026, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  4. Raouf BOUCEKKINE & Aude POMMERET, 2000. "Optimal Capital Accumulation, Energy Cost and the Nature of Technological Progress," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 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," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003025, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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