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Vintage capital and the dynamics of the AK model

  • Raouf Boucekkine
  • Omar Licandro
  • Luis A. Puch
  • Fernando del Rio

This paper analyzes the equilibrium dynamics of an AK-type endogenous growth model with vingage 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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Paper provided by FEDEA in its series Working Papers with number 2000-01.

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Handle: RePEc:fda:fdaddt:2000-01
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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.
  2. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers 9510, University of Western Ontario, Department of Economics.
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  4. Raouf, BOUCEKKINE & David, DE LA CROIX & Omar, LICANDRO, 2006. "Vintage Capital," Discussion Papers (ECON - Département des Sciences Economiques) 2006014, Université catholique de Louvain, Département des Sciences Economiques.
  5. Michel, P., 1980. "On the Transversality Condition in Infinite Horizon Optimal Problems," Cahiers de recherche 8024, Universite de Montreal, Departement de sciences economiques.
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    • 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.
  7. 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.
  8. 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.
  9. Benhabib, Jess & Rustichini, Aldo, 1991. "Vintage capital, investment, and growth," Journal of Economic Theory, Elsevier, vol. 55(2), pages 323-339, December.
  10. 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.
  11. Askenazy, P. & Le Van, C., 1997. "A Model of Optimal Growth Strategy," DELTA Working Papers 97-27, DELTA (Ecole normale supérieure).
  12. 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.
  13. Philippe Aghion & Peter Howitt, 1994. "Growth and Unemployment," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 477-494.
  14. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
  15. Charles I. Jones, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 495-525.
  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. Parente Stephen L., 1994. "Technology Adoption, Learning-by-Doing, and Economic Growth," Journal of Economic Theory, Elsevier, vol. 63(2), pages 346-369, August.
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