The causal relationship between growth and fixed capital formation is reexamined. Our findings are in sharp contrast with the earlier findings by Blomstrom et al. (1996) that capital formation does not contribute to economic growth. However, our findings also reject the conventional wisdom...

In this paper, we construct a simple model based on heterogeneity in workers¡¯ productivity and homogeneity in their working schedules. This simple model can generate unemployment, even if wages adjust instantaneously, firms are perfectly competitive, and firms can perfectly observe...

This paper provides a dynamic optimization model of durable goods inventories to study the interactions between investment demand and the production of capital goods. There are three major findings: first, capital suppliers¡¯ inventory behavior makes investment demand more volatile in...