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I - Q Cycles

Listed author(s):
  • Patrick Francois

    ()

    (University of British Columbia)

  • Huw Lloyd-Ellis

    ()

    (Queen's University)

We develop a model of "intrinsic" business cycles, driven by the decentralized behaviour of entrepreneurs and firms making continuous, divisible improvements in their productivity. We show how equilibrium cycles, associated with strategic delays in implementation and endogenous innovation, arise even in the presence of reversible investment. We derive the implications for the cyclical evolution of both tangible (physical) and intangible (knowledge) capital. In particular, our framework is consistent with key aspects of the somewhat puzzling relationship between fixed capital formation and the stockmarket at business cycle frequencies.

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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1040.pdf
File Function: First version 2005
Download Restriction: no

Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1040.

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Length: 41 pages
Date of creation: Oct 2005
Handle: RePEc:qed:wpaper:1040
Contact details of provider: Postal:
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Phone: (613) 533-2250
Fax: (613) 533-6668
Web page: http://qed.econ.queensu.ca/
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  1. Kiminori Matsuyama, 1999. "Growing Through Cycles in an Infinitely -lived Agent Economy," Discussion Papers 1280, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Lawrence J. Christiano & Terry J. Fitzgerald, 1998. "The business cycle: it's still a puzzle," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 56-83.
  3. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
  4. Simon Gilchrist & Charles P. Himmelberg, 1995. "Evidence on the Role of Cash Flow for Investment," Working Papers 95-01, New York University, Leonard N. Stern School of Business, Department of Economics.
  5. Robert E. Hall, 2001. "The Stock Market and Capital Accumulation," American Economic Review, American Economic Association, vol. 91(5), pages 1185-1202, December.
  6. Douglas Gale, 1996. "Delay and Cycles," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 169-198.
  7. Diego Comin, 2004. "R&D: A Small Contribution to Productivity Growth," NBER Working Papers 10625, National Bureau of Economic Research, Inc.
  8. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  9. Chol-Won Li, "undated". "Science, Diminishing Returns and Long Waves," Working Papers 9715, Business School - Economics, University of Glasgow.
  10. Patrick Francois & Huw Lloyd-Ellis, 2005. "Schumpeterian Restructuring," Working Papers 1039, Queen's University, Department of Economics.
  11. repec:fth:simfra:95-08 is not listed on IDEAS
  12. Francois, P. & Lloyd-Ellis, H., 2001. "Animal Spirits Meets Creative Destruction," Discussion Paper 2001-36, Tilburg University, Center for Economic Research.
  13. Gadi Barlevy, 2004. "The Cost of Business Cycles Under Endogenous Growth," American Economic Review, American Economic Association, vol. 94(4), pages 964-990, September.
  14. Boyan Jovanovic & Jeremy Greenwood, 1999. "The Information-Technology Revolution and the Stock Market," American Economic Review, American Economic Association, vol. 89(2), pages 116-122, May.
  15. Shleifer, Andrei, 1986. "Implementation Cycles," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1163-1190, December.
  16. repec:fth:waterl:9503 is not listed on IDEAS
  17. Wen, Yi, 1998. "Investment cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 22(7), pages 1139-1165, May.
  18. John Laitner & Dmitriy Stolyarov, 2003. "Technological Change and the Stock Market," American Economic Review, American Economic Association, vol. 93(4), pages 1240-1267, September.
  19. Jovanovic, Boyan & Lach, Saul, 1997. "Product Innovation and the Business Cycle," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 3-22, February.
  20. Fumio Hayashi & Tohru Inoue, 1989. "The relationship of firm growth and Q with multiple capital goods: theory and evidence from panel data on Japanese firms," Discussion Paper / Institute for Empirical Macroeconomics 13, Federal Reserve Bank of Minneapolis.
  21. Ellen R. McGrattan, 1991. "The macroeconomic effects of distortionary taxation," Discussion Paper / Institute for Empirical Macroeconomics 37, Federal Reserve Bank of Minneapolis.
  22. Abel, Andrew B & Blanchard, Olivier J, 1986. "The Present Value of Profits and Cyclical Movements in Investment," Econometrica, Econometric Society, vol. 54(2), pages 249-273, March.
  23. Patrick Francois & Huw Lloyd-Ellis, 2003. "Animal Spirits Through Creative Destruction," American Economic Review, American Economic Association, vol. 93(3), pages 530-550, June.
  24. Bart Hobijn & Boyan Jovanovic, 2000. "The Information Technology Revolution and the Stock Market: Evidence," NBER Working Papers 7684, National Bureau of Economic Research, Inc.
  25. Lawrence J. Christiano & Richard M. Todd, 1996. "Time to plan and aggregate fluctuations," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-27.
  26. David Andolfatto & Glenn MacDonald, 1998. "Technology Diffusion and Aggregate Dynamics," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 338-370, April.
  27. Lawrence J. Christiano & Robert J. Vigfusson, 2001. "Maximum likelihood in the frequency domain: the importance of time-to-plan," Working Paper 0106, Federal Reserve Bank of Cleveland.
  28. Bental, Benjamin & Peled, Dan, 1996. "The Accumulation of Wealth and the Cyclical Generation of New Technologies: A Search Theoretic Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 687-718, August.
  29. Blundell, Richard & Bond, Stephen & Devereux, Michael & Schiantarelli, Fabio, 1992. "Investment and Tobin's Q: Evidence from company panel data," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 233-257.
  30. Walde, Klaus, 2002. "The economic determinants of technology shocks in a real business cycle model," Journal of Economic Dynamics and Control, Elsevier, vol. 27(1), pages 1-28, November.
  31. Fumio Hayashi, 1981. "Tobin's Marginal q and Average a : A Neoclassical Interpretation," Discussion Papers 457, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  32. Scott Freeman & Dong-Pyo Hong & Dan Peled, 1999. "Endogenous Cycles and Growth with Indivisible Technological Developments," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(2), pages 402-432, April.
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