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Vintage capital and the dynamics of the AK model

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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 optimal solutions 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 Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico in its series Documentos de Trabajo del ICAE with number 0310.

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Length: 39 pages
Date of creation: 2003
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Handle: RePEc:ucm:doicae:0310

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Keywords: Endogenous growth; Vintage capital; AK model; Differencedifferential equations;

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  1. Parente Stephen L., 1994. "Technology Adoption, Learning-by-Doing, and Economic Growth," Journal of Economic Theory, Elsevier, vol. 63(2), pages 346-369, August.
  2. Raouf Boucekkine & Marc Germain & Omar Licandro & Alphonse Magnus, . "Numerical solution by iterative methods of a class of vintage capital models," Working Papers 98-20, FEDEA.
  3. Jeremy Greenwood & Boyan Jovanovic, 2000. "Accounting for Growth," RCER Working Papers 475, University of Rochester - Center for Economic Research (RCER).
    • 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.
  4. 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.
  5. Michel, P., 1980. "On the Transversality Condition in Infinite Horizon Optimal Problems," Cahiers de recherche 8024, Universite de Montreal, Departement de sciences economiques.
  6. Askenazy, Philippe & Le Van, 1997. "A model of optimal growth strategy," CEPREMAP Working Papers (Couverture Orange) 9707, CEPREMAP.
  7. Raouf Boucekkine & David de la Croix & Omar Licandro, 2006. "Vintage Capital," Economics Working Papers ECO2006/8, European University Institute.
  8. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1996. "Long-Run Implications of Investment-Specific Technological Change," RCER Working Papers 420, University of Rochester - Center for Economic Research (RCER).
  9. Jess Benhabib & Aldo Rustichini, 1990. "Vintage Capital, Investment and Growth," Discussion Papers 886, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
  11. Boucekkine, R. & Germain, M. & Licandro, O., . "Replacement echoes in the vintage capital growth model," CORE Discussion Papers RP -1275, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Bennett T. McCallum, 1996. "Neoclassical vs. Endogenous Growth Analysis: An Overview," NBER Working Papers 5844, National Bureau of Economic Research, Inc.
  13. Aghion, Philippe & Howitt, Peter, 1991. "Growth and Unemployment," CEPR Discussion Papers 577, C.E.P.R. Discussion Papers.
  14. Michael Gort & Jeremy Greenwood & Peter Rupert, 1999. "Measuring the Rate of Technological Progress in Structures," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 207-230, January.
  15. Patrick K. Asea & Paul J. Zak, 1997. "Time-to-Build and Cycles," NBER Technical Working Papers 0211, National Bureau of Economic Research, Inc.
  16. 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, vol. 29(2), pages 235-62, May.
  17. Ellen R. McGrattan, 1998. "A defense of AK growth models," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 13-27.
  18. 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.
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