A Note on NNS Models: Introducing Physical Capital; Avoiding Rationing

Jean-Pierre Danthine and John B. Donaldson

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: This note makes two comments on recent NNS models. First, it disputes the way physical capital has been introduced into these models arguing that this leads to the dubious postulate that the cost of adjusting physical capital stock is an order of magnitude lower than the cost of changing prices. Second it warns against a possible logical inconsistency whereby calibrated NNS models are implicitly assuming that some (price-constrained) firms are willing and able to sell their output below cost.

Keywords: New Neo-Classical synthesis; sticky prices; cost-of-adjusting capital; rationing (search for similar items in EconPapers)
JEL-codes: E30 E32 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2002-02
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Published in Economics Letters, vol.77 (3), nov. 2002, pp. 433-437

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Related works:
Journal Article: A note on NNS models: introducing physical capital; avoiding rationing (2002)
Working Paper: A Note on NNS Models: Introducing Physical Capital; Avoiding Rationing (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:lau:crdeep:02.04

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