An endogenous growth cycle with vintage capital |
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Authors: | Meghnad Desai |
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Institution: | 1. London School of Economics, Houghton Street, WC2A2AE, London, U.K.
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Abstract: | This paper extends Solow's vintage capital model by (a) deriving profits as a function of investments, and (b) adding an investment financing equation in terms of profits. It is shown that these extensions lead to a completely endogenous growth model. The dynamic system yields an equilibrium which is a centre and hence the economy cycles perpetually around the equilibrium point, never reaching it. |
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