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Vintage Capital And the Dynamics of the AK Model

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  • Raouf BOUCEKKINE
  • Omar LICANDRO
  • Luis A. PUCH
  • Fernando DEL RIO

Abstract

This paper analyzes the equilibrium dynamics of an AK-type endogenous growth model with vintage capital. The inclusion of vintage capital leads to oscillatory dynamics governed by replacement echoes, which additionally influence the intercept of the balanced growth path. These features, which are in sharp contrast to those from the standard AK model, can contribute to explaining the short-run deviations observed between investment and growth rates time series. To characterize the convergence properties and the dynamics of the model we develop analytical and numerical methods that should be of interest for the general resolution of endogenous growth models with vintage capital.

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Bibliographic Info

Paper provided by European University Institute in its series Economics Working Papers with number ECO2002/07.

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Date of creation: 2002
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Handle: RePEc:eui:euiwps:eco2002/07

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  1. 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.
  2. Askenazy, Philippe & Le Van, 1997. "A model of optimal growth strategy," CEPREMAP Working Papers (Couverture Orange) 9707, CEPREMAP.
  3. BOUCEKKINE, Raouf & DE LA CROIX, David & LICANDRO, Omar, 2006. "Vintage capital," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2006024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Jeremy Greenwood & Boyan Jovanovic, 2001. "Accounting for Growth," NBER Chapters, in: New Developments in Productivity Analysis, pages 179-224 National Bureau of Economic Research, Inc.
  5. Aghion, Philippe & Howitt, Peter, 1991. "Growth and Unemployment," CEPR Discussion Papers 577, C.E.P.R. Discussion Papers.
  6. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 9510, University of Western Ontario, Department of Economics.
  7. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
  8. Asea, Patrick K. & Zak, Paul J., 1999. "Time-to-build and cycles," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 23(8), pages 1155-1175, August.
  9. Ellen R. McGrattan, 1998. "A defense of AK growth models," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Fall, pages 13-27.
  10. Benhabib, Jess & Rustichini, Aldo, 1991. "Vintage capital, investment, and growth," Journal of Economic Theory, Elsevier, vol. 55(2), pages 323-339, December.
  11. Michel, P., 1980. "On the Transversality Condition in Infinite Horizon Optimal Problems," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 8024, Universite de Montreal, Departement de sciences economiques.
  12. Parente Stephen L., 1994. "Technology Adoption, Learning-by-Doing, and Economic Growth," Journal of Economic Theory, Elsevier, vol. 63(2), pages 346-369, August.
  13. Kocherlakota, Narayana R & Yi, Kei-Mu, 1997. "Is There Endogenous Long-Run Growth? Evidence from the United States and the United Kingdom," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 29(2), pages 235-62, May.
  14. Kocherlakota, Narayana R. & Yi, Kei-Mu, 1995. "Can convergence regressions distinguish between exogenous and endogenous growth models?," Economics Letters, Elsevier, vol. 49(2), pages 211-215, August.
  15. Michael Gort & Jeremy Greenwood & Peter Rupert, 1998. "Measuring the rate of technological progress in structures," Working Paper 9806, Federal Reserve Bank of Cleveland.
  16. Boucekkine, Raouf & Germain, Marc & Licandro, Omar & Magnus, Alphonse, 2001. "Numerical solution by iterative methods of a class of vintage capital models," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 25(5), pages 655-669, May.
  17. Bennett T. McCallum, 1996. "Neoclassical vs. endogenous growth analysis: an overview," Economic Quarterly, Federal Reserve Bank of Richmond, Federal Reserve Bank of Richmond, issue Fall, pages 41-71.
  18. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(2), pages 495-525, May.
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