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A computational general equilibrium model with vintage capital

Author Info

  • Cadiou, Loı̈c
  • Dées, Stéphane
  • Laffargue, Jean-Pierre

Abstract

This paper presents a vintage capital model assuming putty–clay investment and perfect foresight. The model is written in discrete time and is simulated by using a second order relaxation algorithm. By computing the eigenvalues of the dynamic system, we have checked the conditions of existence and uniqueness of a solution (Blanchard and Kahn's conditions) and identified the echo effect that characterizes vintage capital models and the related dynamics of creation and destruction. By calibrating the model on French data, it has been proved useful to explain the medium-term movements in the distribution of income in France during the last three decades.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165188902001124
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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 27 (2003)
Issue (Month): 11 ()
Pages: 1961-1991

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Handle: RePEc:eee:dyncon:v:27:y:2003:i:11:p:1961-1991
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

Keywords: Vintage capital models; Replacement echoes; Dynamic model solving; Medium-term dynamics;

Other versions of this item:

Find related papers by JEL classification:
  • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
  • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
  • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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  1. 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, vol. 25(5), pages 655-669, May.
  2. Boucekkine, Raouf, 1995. "An alternative methodology for solving nonlinear forward-looking models," Journal of Economic Dynamics and Control, Elsevier, vol. 19(4), pages 711-734, May.
  3. Calvo, Guillermo A, 1976. "Optimal Growth in a Putty-Clay Model," Econometrica, Econometric Society, vol. 44(5), pages 867-78, September.
  4. R. Boucekkine & M. Germain & O. Licandro & A. Magnus, . "Creative destruction, investment volatility, and the average age of capital," Working Papers 97-08, FEDEA.
  5. 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.
  6. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July.
  7. Britto, Ronald, 1970. "Durability and Obsolescence in Putty-Clay Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 11(3), pages 455-62, October.
  8. Ricardo J. Caballero & Mohamad L. Hammour, 1991. "The Cleansing Effect of Recessions," NBER Working Papers 3922, National Bureau of Economic Research, Inc.
  9. Sargent, Thomas J & Wallace, Neil, 1975. ""Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 241-54, April.
  10. Céline Prigent, 1999. "La part des salaires dans la valeur ajoutée en France : une approche macroéconomique," Économie et Statistique, Programme National Persée, vol. 323(1), pages 73-94.
  11. Adachi, Hideyuki, 1974. "Factor Substitution and Durability of Capital in a Two-Sector Putty-Clay Model," Econometrica, Econometric Society, vol. 42(5), pages 773-801, September.
  12. Oliver J. Blanchard, 1997. "The Medium Run," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 89-158.
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Cited by:

  1. Loïc Cadiou & Julien Genet & Jean-Louis Guérin, 2002. "Evolutions démographiques et marché du travail : des liens complexes parfois contradictoires," Working Papers 2002-16, CEPII research center.
  2. Luci Ellis & Kathryn Smith, 2010. "The Global Upward Trend in the Profit Share," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 56(3), pages 231-256.
  3. Shigeru Wakita, 2006. "The Lost Decade in the Japanese Labor Market : Labor’s share and Okun’s Law," Labor Economics Working Papers 22317, East Asian Bureau of Economic Research.

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