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Investment-Saving Imbalances with Endogenous Capital Stock

  • Ronny Mazzocchi

    ()

The current consensus in macroeconomics, or New Neoclassical Synthesis (NNS), is based on dynamically stochastic general equilibrium (DSGE) modeling with a RBC core to which nominal rigidities are added by way of imperfect competition. The strategy is to minimize the frictions that are required to reproduce both persistent real effects of monetary policy and interaction of interest and prices in a rigorous framework with intertemporal optimization, forward-looking behavior and continuously clearing markets. Unfortunately this “equi- librium” framework do not allow to discuss the effects and the rela- tions between financial markets and real economy, which were the core of the economic crisis of 2008. This paper presents a dynamic model with endogenous capital stock whereby it is possible to assess, and hopefully clarify, some basic issues concerning the macroeconomics of saving-investment imbalances.

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Paper provided by Department of Economics and Management in its series DEM Discussion Papers with number 2013/14.

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Date of creation: 2013
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Handle: RePEc:trn:utwpem:2013/14
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