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Optimal policy and consumption smoothing effects in the time-to-build AK model

Author

Listed:
  • M. Bambi
  • G. Fabbri

  • F. Gozzi

    (Dipartimento di Scienze Economiche ed Aziendali - LUISS - Libera Università Internazionale degli Studi Sociali Guido Carli [Roma])

Abstract

In this paper, the dynamic programming approach is exploited in order to identify the closed loop policy function, and the consumption smoothing mechanism in an endogenous growth model with time to build, linear technology and irreversibility constraint in investment. Moreover, the link among the time to build parameter, the real interest rate, and the magnitude of the smoothing effect is deeply investigated and compared with what happens in a vintage capital model characterized by the same technology and utility function. Finally, we have analyzed the effect of time to build on the speed of convergence of the main aggregate variables.

Suggested Citation

  • M. Bambi & G. Fabbri & F. Gozzi, 2012. "Optimal policy and consumption smoothing effects in the time-to-build AK model," Post-Print hal-01615440, HAL.
    • Handle: RePEc:hal:journl:hal-01615440
    DOI: 10.1007/s00199-010-0577-3
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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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