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

  • Bambi, Mauro
  • Fabbri, Giorgio
  • Gozzi, Fausto

In this paper the dynamic programming approach is exploited in order to identify the closed loop policy function, and the consumption smoothing mechanisms 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 maximum capital reproduction 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.

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File URL: http://mpra.ub.uni-muenchen.de/17128/1/MPRA_paper_17128.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17128.

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Date of creation: 27 Aug 2009
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Handle: RePEc:pra:mprapa:17128
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  1. Patrick Asea & Paul J. Zak, 1997. "Time-to-Build and Cycles," UCLA Economics Working Papers 767, UCLA Department of Economics.
  2. Rochelle M. Edge, 2000. "Time-to-build, time-to-plan, habit-persistence, and the liquidity effect," International Finance Discussion Papers 673, Board of Governors of the Federal Reserve System (U.S.).
  3. Fabrice COLLARD & Omar LICANDRO & Luis A. PUCH, 2004. "The short-run dynamics of optimal growth models with delays," Economics Working Papers ECO2004/04, European University Institute.
  4. BOUCEKKINE, Raouf & LICANDRO, Omar & PUCH, Luis A. & DEL RIO, Fernando, . "Vintage capital and the dynamics of the AK model," CORE Discussion Papers RP -1757, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Akiomi Kitagawa & Akihisa Shibata, 2005. "Endogenous growth cycles in an overlapping generations model with investment gestation lags," Economic Theory, Springer, vol. 25(3), pages 751-762, 04.
  6. Hippolyte D'Albis & Emmanuelle Augeraud-Véron, 2007. "Balanced cycles in an OLG model with a continuum of finitely-lived individuals," Post-Print hal-00630229, HAL.
  7. El-Hodiri, Mohamed A & Loehman, Edna & Whinston, Andrew B, 1972. "An Optimal Growth Model with Time Lags," Econometrica, Econometric Society, vol. 40(6), pages 1137-46, November.
  8. Fabbri, Giorgio & Gozzi, Fausto, 2008. "Solving optimal growth models with vintage capital: The dynamic programming approach," Journal of Economic Theory, Elsevier, vol. 143(1), pages 331-373, November.
  9. Mauro Bambi, 2006. "Endogenous Growth and Time-to-Build: the AK Case," Economics Working Papers ECO2006/17, European University Institute.
  10. Mauro Bambi, 2008. "Unifying time-to-build theory," CER-ETH Economics working paper series 08/98, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  11. Ortigueira, Salvador & Santos, Manuel S, 1997. "On the Speed of Convergence in Endogenous Growth Models," American Economic Review, American Economic Association, vol. 87(3), pages 383-99, June.
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