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Can we identify the relative price between consumption and investment?

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  • Joao Ejarque

    ()

  • Stephen McKnight

    ()

Abstract

This paper considers various AK models to investigate inference about the relative price between consumption and investment using NIPA data. We find, that depending on the model used, we can legitimately generate different time series for this price. If we successfully construct a falling price of investment, the model implies an inadmissibly low share of consumption in output. If we use an admissible share of consumption we generate investment prices which increase over time, contrary to the intuition generated by the price of equipment goods.

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File URL: http://www.essex.ac.uk/economics/discussion-papers/papers-text/dp615.pdf
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Bibliographic Info

Paper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 615.

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Date of creation: 10 Aug 2006
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Handle: RePEc:esx:essedp:615

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  1. Felbermayr, Gabriel & Licandro, Omar, 2005. "The Under-Estimated Virtues of the Two-sector AK Model. Contributions to Macroeconomics," Munich Reprints in Economics 20595, University of Munich, Department of Economics.
  2. Gabriel J. FELBERMAYR & Omar LICANDRO, 2002. "The Under-Estimated Virtues of the Two-Sector AK Model," Economics Working Papers ECO2002/27, European University Institute.
  3. Gregory W. Huffman & Mark A. Wynne, 1995. "The role of intratemporal adjustment costs in a multi-sector economy," Working Papers 9508, Federal Reserve Bank of Dallas.
  4. Hornstein, Andreas & Praschnik, Jack, 1997. "Intermediate inputs and sectoral comovement in the business cycle," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 573-595, December.
  5. João Ejarque & Ana Balcão Reis, 2003. "More Lessons from Taking an AK Model to the Data," Discussion Papers 03-37, University of Copenhagen. Department of Economics.
  6. Fisher,Franklin M. & Shell,Karl, 1998. "Economic Analysis of Production Price Indexes," Cambridge Books, Cambridge University Press, number 9780521556231, October.
  7. Fatas, Antonio, 2000. "Endogenous growth and stochastic trends," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 107-128, February.
  8. Ana Balcao Reis & Joao Ejarque, 2005. "(Relative Price) Lessons from Taking an AK Model to the Data," 2005 Meeting Papers 312, Society for Economic Dynamics.
  9. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  10. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
  11. Ingram, Beth Fisher & Kocherlakota, Narayana R. & Savin, N. E., 1994. "Explaining business cycles: A multiple-shock approach," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 415-428, December.
  12. Karl Whelan, 2000. "A guide to the use of chain aggregated NIPA data," Finance and Economics Discussion Series 2000-35, Board of Governors of the Federal Reserve System (U.S.).
  13. Whelan, Karl, 2003. " A Two-Sector Approach to Modeling U.S. NIPA Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(4), pages 627-56, August.
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