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Endogenous vs Exogenously Driven Fluctuations in Vintage Capital Models

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Author Info
Boucekkine, Raouf (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
del Rio, Fernando (CEPREMAP, France)
Licandro, Omar (FEDEA, Spain)

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Abstract

In this paper, we present a simple vintage capital growth model in which both exogenous and endogenous fluctuations sources are present. Indeed, it can be seen as a particular case of Caballero and Hammour (1996)'s creative destruction model, with advantage that analytical characterization of the short run and asymptotic dynamics is partially allowed. In particular, we show that job creation follows a delayed-differential equation with periodic coefficients. The delay is equal to the optimal age of capital goods, and can be taken as a measure of the periodicity of the endogenous replacement echoes inherent to vintage models. The period of the coefficients is equal to the period of an exogenous profitability cycle. We mathematically show that job creation is asymptotically periodic, with the same period as the profitability cycle. Furthermore using an explicit numerical method, we find that replacement echoes generally dominate the short run dynamics. Finally, we find that the combination of the two fluctuations sources favors the appearance of asymmetries in job creation and job destruction patterns.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 1999007.

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Length: 25
Date of creation: 01 Mar 1999
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Handle: RePEc:ctl:louvir:1999007

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Related research
Keywords: Endogenous fluctuations; Vintage capital models; Replacement echoes; Differential-difference equations; Floquet representations;

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Find related papers by JEL classification:
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
C63 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computational Techniques

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  1. Raouf, BOUCEKKINE & David, DE LA CROIX & Omar, LICANDRO, 2006. "Vintage Capital," Discussion Papers (ECON - Département des Sciences Economiques) 2006014, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
    Other versions:
    • Raouf Boucekkine & David de la Croix & Omar Licandro, 2006. "Vintage Capital," Economics Working Papers ECO2006/8, European University Institute. [Downloadable!]
    • BOUCEKKINE, Raouf & DE LA CROIX, David & LICANDRO, Omar, 2006. "Vintage capital," CORE Discussion Papers 2006024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  2. Timothy Cogley & James M. Nason, 1993. "Output dynamics in real business cycle models," Working Papers in Applied Economic Theory 93-10, Federal Reserve Bank of San Francisco.
    Other versions:
  3. Simón Sosvilla-Rivero & Miguel Angel Galindo & Javier Alonso, . "Tax-burden convergence in Europe," Working Papers 98-13, FEDEA. [Downloadable!]
    Other versions:
  4. R. Boucekkine & M. Germain & O. Licandro & A. Magnus, . "Creative destruction, investment volatility, and the average age of capital," Working Papers 97-08, FEDEA.
    Other versions:
  5. Olga Cantó & Ana R. Cardoso & Juan F. Jimeno, . "Earnings inequality in Portugal and Spain: Constrats and similarities," Working Papers 98-08, FEDEA.
  6. José A. Herce & Simón Sosvilla-Rivero & Juan J. De Lucio, . "A time-series examination of convergence in social protection across EU countries," Working Papers 98-10, FEDEA. [Downloadable!]
  7. Fernandez-Rodriguez, Fernando & Sosvilla-Rivero, Simon & Andrada-Felix, Julian, 1999. "Exchange-rate forecasts with simultaneous nearest-neighbour methods: evidence from the EMS," International Journal of Forecasting, Elsevier, vol. 15(4), pages 383-392, October. [Downloadable!] (restricted)
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  8. Benhabib, Jess & Rustichini, Aldo, 1991. "Vintage capital, investment, and growth," Journal of Economic Theory, Elsevier, vol. 55(2), pages 323-339, December. [Downloadable!] (restricted)
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  9. Davis, Steven J & Haltiwanger, John C, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 819-63, August. [Downloadable!] (restricted)
    Other versions:
  10. Carlos García-Serrano & Juan F. Jimeno, . "Labour reallocation and labour market institutions: Evidence from Spain," Working Papers 98-07, FEDEA. [Downloadable!]
  11. Boucekkine, Raouf & Del Rio, Fernando & Licandro, Omar, 1999. "Endogenous vs exogenously driven fluctuations in vintage capital models," CEPREMAP Working Papers (Couverture Orange) 9901, CEPREMAP. [Downloadable!]
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  12. Cooley, Thomas F. & Greenwood, Jeremy & Yorukoglu, Mehmet, 1997. "The replacement problem," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 457-499, December. [Downloadable!] (restricted)
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  13. Wen, Yi, 1998. "Investment cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 22(7), pages 1139-1165, May. [Downloadable!] (restricted)
  14. Grandmont, Jean-Michel, 1985. "On Endogenous Competitive Business Cycles," Econometrica, Econometric Society, vol. 53(5), pages 995-1045, September. [Downloadable!] (restricted)
  15. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932.
  16. Fernando Fernández-Rodríguez & Simón Sosvilla-Rivero & Julián Andrada, . "Assesing the Economic Value of Nearest-neighbour Exchange-Rate Forecasts," Working Papers 98-18, FEDEA. [Downloadable!]
  17. Raouf Boucekkine & Omar Licandro & Christopher Paul, . "Differential-Difference Equations in Economics: On the Numerical Solution of Vintage Capital Growth Models," Computing in Economics and Finance 1996 _036, Society for Computational Economics. [Downloadable!]
    Other versions:
  18. Carmen Fernandez & Eduardo Ley & Mark F.J. Steel, 1998. "Benchmark Priors for Bayesian Model Averaging," Econometrics 9804001, EconWPA, revised 31 Jul 1999. [Downloadable!]
    Other versions:
  19. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November. [Downloadable!] (restricted)
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  20. Caballero, Ricardo J & Hammour, Mohamad L, 1996. "On the Timing and Efficiency of Creative Destruction," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 805-52, August. [Downloadable!] (restricted)
    Other versions:
  21. Benhabib, Jess & Rustichini, Aldo, 1989. "A Vintage Capital Model Of Investment And Growth: Theory And Evidence," Working Papers 89-26, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
  22. Boucekkine, Raouf & Germain, Marc & Licandro, Omar, 1997. "Replacement Echoes in the Vintage Capital Growth Model," Journal of Economic Theory, Elsevier, vol. 74(2), pages 333-348, June. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Raouf Boucekkine & David de la Croix & Omar Licandro, . "vintage human capital, demographic trends and endogenous growth," Working Papers 2000-02, FEDEA. [Downloadable!]
    Other versions:
  2. Fernando Fernández-Rodríguez & Christian González-Martel* & Simón Sosvilla-Rivero, . "On the profitability of technical trading rules based on arifitial neural networks : evidence from the Madrid stock market," Working Papers 99-07, FEDEA. [Downloadable!]
    Other versions:
  3. Boucekkine, Raouf & del Rio, Fernando & Licandro, Omar, 1999. "The Importance of the Embodied Question Revisited," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999026, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
    Other versions:
  4. Eric Dor & in Durré, 2002. "Monetary Policy and the New Economy. Between Supply Shock and Financial Bubble," Recherches économiques de Louvain, De Boeck Université, vol. 68(1), pages 221-237. [Downloadable!]
    Other versions:
  5. Cepii & Cepremap, 2001. "MARMOTTE: A Multinational Model," Working Papers 2001-15, CEPII research center. [Downloadable!]
  6. Raouf Boucekkine & Fernando del Río & Omar Licandro, . "Endogenous vs Exogenously Driven Fluctuations in Vintage Capital Models," Working Papers 98-19, FEDEA. [Downloadable!]
    Other versions:
  7. Boucekkine, Raouf & Martinez, Blanca, 1999. "Machine Replacement, Technology Adoption and Convergence," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999025, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  8. Raouf Boucekkine & David de la Croix & Omar Licandro, . "Modelling vintage structures with DDEs: Principles and applications," Working Papers 2004-07, FEDEA. [Downloadable!]
    Other versions:
  9. Kort, P.M. & Feichtinger, G. & Hartl, R.F. & Veliov, V.M., 2003. "Environmental policy, the porter hypothesis and the composition of capital: effects of learining and techonological progress," Discussion Paper 61, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  10. Raouf Boucekkine & Fernando del Río & Omar Licandro, . "Obsolescence Vs modernization in a Schumpeterian vintage capital model," Working Papers 2000-27, FEDEA. [Downloadable!]
  11. Savvidou, Eleni, 2003. "The Relationship Between Skilled Labor and Technical Change," Working Paper Series 2003:27, Uppsala University, Department of Economics. [Downloadable!]
  12. repec:bep:thetop:v:6:y:2006:i:1:p:1263-1263 is not listed on IDEAS
  13. Salvador Barrios, . "Foreign direct investment and industrial development in host countries," Working Papers 98-21, FEDEA. [Downloadable!]
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