Economics at your fingertips  

How non-traded goods may generate quasi-quadratic costs for capital adjustment

Kerk Phillips ()

Economics Letters, 2015, vol. 127, issue C, 24-26

Abstract: This paper shows that a two-tiered production structure with both traded and non-traded intermediate goods and non-traded final goods can generate a cost of capital adjustment that is very similar to the quadratic adjustment cost often assumed in single good macroeconomic models. This implies that while a quadratic loss function may seem like an ad hoc adjustment, it can be rationalized by sound theory from a more detailed model.

Keywords: Nontraded goods; Adjustment costs; Quadratic; Capital accumulation (search for similar items in EconPapers)
JEL-codes: E22 F10 F47 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: How Non-traded Goods May Generate Quasi-quadratic Costs for Capital Adjustment (2014) Downloads
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:

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-04-15
Handle: RePEc:eee:ecolet:v:127:y:2015:i:c:p:24-26