Vintage capital and expectations driven business cycles

Arbeitspapier

This paper demonstrates that increased optimism about future productivity can generate an immediate economic expansion in a neoclassical model with vintage capital and variable capacity utilization. Previous research has documented that standard neoclassical models cannot generate a simultaneous increase in consumption, investment, and hours in response to news shocks, and that optimism in these models tends to reduce investment and hours. When technology is vintage specific, however, expectations of higher future productivity raise the demand for new vintages of capital relative to old capital. Capital depreciates faster when utilization is high, but this depreciation only affects installed capital. The cost of high depreciation therefore falls when the value of installed capital falls. It is demonstrated here that with standard parameter values, more optimism raises utilization, consumption, investment, hours, and output.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: SSE/EFI Working Paper Series in Economics and Finance ; No. 643

Klassifikation und Themen

• Klassifikation: Wirtschaft ; General Aggregative Models: Neoclassical ; Business Fluctuations; Cycles
• Thema: Expectations ; News ; Business cycles ; Vintage capital ; Capital-embodied technological change ; Erwartungstheorie ; Wirtschaftswachstum ; Konjunktur ; Kapazitätsauslastung ; Technischer Fortschritt ; Kapitalproduktivität

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Flodén, Martin
• Ereignis: Veröffentlichung
• (wer): Stockholm School of Economics, The Economic Research Institute (EFI)
• (wo): Stockholm
• (wann): 2006

Weitere Informationen

• Handle: http://hdl.handle.net/10419/56140
• Letzte Aktualisierung: 20.09.2024, 08:23 MESZ