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Optimal policy and consumption smoothing effects in the time-to-build AK model

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Author Info
Bambi, Mauro
Fabbri, Giorgio
Gozzi, Fausto

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Abstract

In this paper the dynamic programming approach is exploited in order to identify the closed loop policy function, and the consumption smoothing mechanisms in an endogenous growth model with time to build, linear technology and irreversibility constraint in investment. Moreover the link among the time to build parameter, the maximum capital reproduction rate, and the magnitude of the smoothing effect is deeply investigated and compared with what happens in a vintage capital model characterized by the same technology and utility function. Finally we have analyzed the effect of time to build on the speed of convergence of the main aggregate variables.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17128.

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Date of creation: 27 Aug 2009
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Handle: RePEc:pra:mprapa:17128

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Related research
Keywords: Time-to-build; AK model; Dynamic programming; optimal strategies; closed loop policy.;

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

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References listed on IDEAS
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  1. Asea, Patrick K. & Zak, Paul J., 1999. "Time-to-build and cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 23(8), pages 1155-1175, August. [Downloadable!] (restricted)
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  2. El-Hodiri, Mohamed A & Loehman, Edna & Whinston, Andrew B, 1972. "An Optimal Growth Model with Time Lags," Econometrica, Econometric Society, vol. 40(6), pages 1137-46, November. [Downloadable!] (restricted)
  3. Ortigueira, Salvador & Santos, Manuel S, 1997. "On the Speed of Convergence in Endogenous Growth Models," American Economic Review, American Economic Association, vol. 87(3), pages 383-99, June. [Downloadable!] (restricted)
  4. Boucekkine, Raouf & Licandro, Omar & Puch, Luis A. & del Rio, Fernando, 2005. "Vintage capital and the dynamics of the AK model," Journal of Economic Theory, Elsevier, vol. 120(1), pages 39-72, January. [Downloadable!] (restricted)
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  5. Fabrice COLLARD & Omar LICANDRO & Luis A. PUCH, 2004. "The short-run dynamics of optimal growth models with delays," Economics Working Papers ECO2004/04, European University Institute. [Downloadable!]
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  6. Fabbri, Giorgio & Gozzi, Fausto, 2008. "Solving optimal growth models with vintage capital: The dynamic programming approach," Journal of Economic Theory, Elsevier, vol. 143(1), pages 331-373, November. [Downloadable!] (restricted)
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