We propose a sectoral–shift theory of aggregate factor productivity for a class of economies with AK technologies … persistent endogenous fluctuations in the sectoral distribution of physical capital which, in turn, responds to reversible … exogenous shifts in relative sector productivities. Surplus capital from less productive sectors is lent to more productive ones …

productivity shocks, using capital-labor trade-off. The model generates higher volatilities of key variables and therefore enhances …We implement capital in an endogenous separations New Keynesian matching model. In contrast to the vintage capital … theory, we suggest a more general approach, such that workers have unrestricted access to a proportional share of the capital …