General Equilibrium Vintage Capital Growth Models Displaying Periodic Solutions : A Theoretical Example
In a dynamic general equilibrium setup, this paper highlights the role of vintages and creative destruction in business fluctuations. By stressing the forward-looking characteristic of the optimal scrapping rule, we use a standard rational expectations argument to show the constancy of the scrapping function in a linear utility function framework. Secondly, we prove that equilibrium output shows a purely periodic behavior around an exponential growth trend, the pattern of the cycle being determined by the pattern of initial conditions. Actually, this paper points at the so-called echoe effects as a relevant economic fluctuations source, an issue rather neglected by theorists since the publication of Solow et alii (1966) seminal paper.
Year of publication: |
1996-06-01
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Authors: | BOUCEKKINE, Raouf ; GERMAIN, Marc ; LICANDRO, Omar |
Institutions: | Center for Operations Research and Econometrics (CORE), École des Sciences Économiques de Louvain |
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