Optimal policy and consumption smoothing effects in the time-to-build AK model

Mauro Bambi (), Giorgio Fabbri () and Fausto Gozzi

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper the dynamic programming approach is exploited in order to identify the closed loop policy function, and the consumption smoothing mechanisms in an endogenous growth model with time to build, linear technology and irreversibility constraint in investment. Moreover the link among the time to build parameter, the maximum capital reproduction rate, and the magnitude of the smoothing effect is deeply investigated and compared with what happens in a vintage capital model characterized by the same technology and utility function. Finally we have analyzed the effect of time to build on the speed of convergence of the main aggregate variables.

Keywords: Time-to-build; AK model; Dynamic programming; optimal strategies; closed loop policy. (search for similar items in EconPapers)
JEL-codes: E32 E22 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2009-08-27
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:17128

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