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On Investment and Cycles in Explicitely Solved Vintage Capital Models

Hippolyte d'Albis () and Jean-Pierre Drugeon

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Abstract: The purpose of this contribution is to consider a discrete time formulation that would allow for clarifying some salient features of a vintage based understanding of the capital stock..ree main lines of conclusions are established on an analytical basis. First and for an elementary conguration with linear utility, it is proved that the rate of growth of investment is prone to andoscillating—convergent, sustained or unstable—motions. Second and for an environment with a linear production technology and a AK setup, the dynamics of investment is explicitly solved and it is established that the rate of growth of investment may either converge to the steady growth solution in oscillating way, diverge from that solution in a oscillating way, or even undergo permanent sustained oscillations with a periodicity of two. .ird, it is proved that no perennial .uctuations can emerge within a benchmark environment with strictly concave utilities and production technologies. On a methodological basis, few restrictions are superimposed, the arguments remain fairly general and the proofs are elementary.

Keywords: Vintage Capital; Optimal Growth; Discrete Time (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-gro, nep-mac and nep-upt
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