I - Q Cycles

Patrick Francois () and Huw Lloyd-Ellis

No 1040, Working Paper from Economics Department, Queen's University

Abstract: We develop a model of "intrinsic" business cycles, driven by the decentralized behaviour of entrepreneurs and firms making continuous, divisible improvements in their productivity. We show how equilibrium cycles, associated with strategic delays in implementation and endogenous innovation, arise even in the presence of reversible investment. We derive the implications for the cyclical evolution of both tangible (physical) and intangible (knowledge) capital. In particular, our framework is consistent with key aspects of the somewhat puzzling relationship between fixed capital formation and the stockmarket at business cycle frequencies.

Keywords: Tobin's Q; fixed capital formation; intangible investment; cycles and growth (search for similar items in EconPapers)
JEL-codes: E0 E3 O3 O4 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2005-10
New Economics Papers: this item is included in nep-bec, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1040.pdf First version 2005 (application/pdf)

Related works:
Working Paper: I - Q Cycles (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1040

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