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The Replacement Problem

Thomas Cooley (), Jeremy Greenwood and Mehmet Yorukoglu ()

No 9408, Working Papers from Centro de Investigacion Economica, ITAM

Abstract: We construct a vintage capital model of economic growth in which the decision to replace old technologies with new ones is modeled explicitly. Depreciation in this environment is an economic, not a physical concept. We describe the balanced growth paths and the transitional dynamics of this economy. We illustrate the importance of vintage capital by analysing the response of the economy to fiscal policies designed to stimulate investment in new technologies.

Pages: 34 pages
Date: 1994-11
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Journal Article: The replacement problem (1997) Downloads
Working Paper: The Replacement Problem (1997)
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