Abstract
In this paper, the dynamic programming approach is exploited in order to identify the closed loop policy function, and the consumption smoothing mechanism in an endogenous growth model with time to build, linear technology and irreversibility constraint in investment. Moreover, the link among the time to build parameter, the real interest rate, and the magnitude of the smoothing effect is deeply investigated and compared with what happens in a vintage capital model characterized by the same technology and utility function. Finally, we have analyzed the effect of time to build on the speed of convergence of the main aggregate variables.
| Original language | English |
|---|---|
| Pages (from-to) | 635-669 |
| Number of pages | 35 |
| Journal | Economic Theory |
| Volume | 50 |
| Issue number | 3 |
| Early online date | 3 Nov 2010 |
| DOIs | |
| Publication status | Published - Aug 2012 |
Keywords
- Time-to-build
- AK model
- Dynamic programming
- Optimal strategies
- Closed loop policy
- E22
- E32
- O40