On the solution of the growth model with investment-specific technological change
Recent work by Greenwood, Hercowitz, and Krusell (1997 and 2000) and Fisher (2003) has emphasized the importance of investment-specific technological change as a main driving force behind long-run growth and the business cycle. This paper shows how the growth model with investment-specific technological change has a closed-form solution if capital fully depreciates. This solution furthers our understanding of the model, and it constitutes a useful benchmark to check the accuracy of numerical procedures to solve dynamic macroeconomic models in cases with several state variables.
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- Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 2000.
"The role of investment-specific technological change in the business cycle,"
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- Jonas D.M. Fisher, 1999. "The new view of growth and business cycles," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 35-56.
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- 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).
- Jonas D. M. Fisher, 2002.
"Technology shocks matter,"
Working Paper Series
WP-02-14, Federal Reserve Bank of Chicago.
- Jonas Fisher, 2004. "Technology Shocks Matter," Econometric Society 2004 North American Winter Meetings 14, Econometric Society.
- Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997.
"Capital-skill complementarity and inequality: a macroeconomic analysis,"
239, Federal Reserve Bank of Minneapolis.
- Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
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