A Note on NNS Models: Introducing Physical Capital; Avoiding Rationing

Jean-Pierre Danthine () and John B. Donaldson

Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) from Université de Lausanne, Faculté des HEC, DEEP

Abstract: This note makes two comments on recent NNS models. First, it disputes the way physical capital has been introduced into these models arguing that this leads to the dubious postulate that the cost of adjusting physical capital stock is an order of magnitude lower than the cost of changing prices. Second it warns against a possible logical inconsistency whereby calibrated NNS models are implicitly assuming that some (price-constrained) firms are willing and able to sell their output below cost.

Keywords: New Neo-Classical synthesis; sticky prices; cost-of-adjusting capital; rationing (search for similar items in EconPapers)
JEL-codes: E30 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge
Date: 2002-02
View list of references View citations in EconPapers

Published in Economics Letters, vol.77 (3), nov. 2002, pp. 433-437

Downloads: (external link)
http://www.hec.unil.ch/deep/textes/02.04.pdf (application/pdf)

Related works:
Working Paper: A Note on NNS Models: Introducing Physical Capital; Avoiding Rationing (2002)
Journal Article: A note on NNS models: introducing physical capital; avoiding rationing (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:lau:crdeep:02.04

Access Statistics for this paper

More papers in Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) from Université de Lausanne, Faculté des HEC, DEEP
Address: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Series data maintained by Claudine Delapierre Saudan ().