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Intangible capital in a real business cycle model

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  • Malik, Kashif Zaheer
  • Ali, Syed Zahid
  • Khalid, Ahmed M.

Abstract

Recent empirical studies have shown that intangible capital plays an important role in explaining productivity gains that have occurred during the last two decades. By introducing intangible capital in an otherwise standard theoretical real business cycle model, this paper aims to provide a theoretical foundation of the empirical findings. Our results indicate that investment in intangible capital is pro-cyclical. Both transitory as well as permanent productivity shocks increase investment in intangible capital. However, in case of a permanent technology shock we learn that firms allocate more labor and physical capital to the creation of intangible capital which increases future profits at the cost of current profit. We also find that investment in intangible capital plays an important role in producing endogenous movements in productivity.

Suggested Citation

  • Malik, Kashif Zaheer & Ali, Syed Zahid & Khalid, Ahmed M., 2014. "Intangible capital in a real business cycle model," Economic Modelling, Elsevier, vol. 39(C), pages 32-48.
  • Handle: RePEc:eee:ecmode:v:39:y:2014:i:c:p:32-48
    DOI: 10.1016/j.econmod.2014.02.018
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    Cited by:

    1. repec:spr:metrik:v:80:y:2017:i:3:d:10.1007_s00184-016-0608-6 is not listed on IDEAS
    2. Shahedul A. Khan, 0. "Exponentiated Weibull regression for time-to-event data," Lifetime Data Analysis: An International Journal Devoted to Statistical Methods and Applications for Time-to-Event Data, Springer, vol. 0, pages 1-27.

    More about this item

    Keywords

    Intangible capital; Real business cycle; Productivity shocks;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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