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Vintage capital and the dynamics of the AK model

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Listed author(s):
  • BOUCEKKINE, Raouf
  • LICANDRO, Omar
  • PUCH, Luis A.
  • DEL RIO, Fernando

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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File URL: http://dx.doi.org/10.1016/j.jet.2004.02.006
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number 1757.

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Handle: RePEc:cor:louvrp:1757
Note: In : Journal of Economic Theory, 120, 39-72, 2005
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Find related papers by JEL classification:
  • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
  • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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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. 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.
  3. 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.
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  5. Raouf Boucekkine & David de la Croix & Omar Licandro, 2006. "Vintage Capital," Economics Working Papers ECO2006/8, European University Institute.
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  13. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  14. Benhabib, Jess & Rustichini, Aldo, 1991. "Vintage capital, investment, and growth," Journal of Economic Theory, Elsevier, vol. 55(2), pages 323-339, December.
  15. Ellen R. McGrattan, 1998. "A defense of AK growth models," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 13-27.
  16. Bennett T. McCallum, 1996. "Neoclassical vs. endogenous growth analysis: an overview," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 41-71.
  17. 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.
  18. 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 235-262, May.
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