The Dynamics of a Simple Relative Adjustment Cost Framework

Gustav Feichtinger, Peter Kort, Richard F. Hartl and Franz Wirl

German Economic Review, 2001, vol. 2, issue 3, 255-268

Abstract: This paper considers a capital accumulation model with the specific feature that adjustment costs depend on investment relative to the size of the capital stock. This framework has, beyond its plausible yet neglected setting, a number of interesting consequences. In particular, the possibility of multiple equilibria, of an unstable steady state and thus of a (`history dependent’) threshold associated with concavity is surprising given a voluminous literature on multiple, history‐dependent equilibria emphasizing non‐concavities (or convexities).

Date: 2001
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https://doi.org/10.1111/1468-0475.00037

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Journal Article: The Dynamics of a Simple Relative Adjustment Cost Framework (2001)
Working Paper: The dynamics of a simple relative adjustment-cost framework (2001)
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