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N° 2000 - 20 |
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| December |
| A computational General Equilibrium Model
with Vintage Capital |
Loïc Cadiou
Stéphane Dées
Jean-Pierre Laffargue |
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| This paper presents a vintage capital model
assuming putty-clay investment and perfect foresight. The model is written in
discrete time and is simulated by using a second order relaxation algorithm. By
computing the eigenvalues of the dynamic system, we have first checked the conditions
of existence and uniqueness of a solution (Blanchard and Khan's conditions) and
identified the echo effect that characterizes vintage capital models and the related
dynamics of creation and destruction. By calibrating the model on French data,
it has been proved useful to explain the medium-term movements in the distribution
of income in France during the last three decades. |
Abstract |
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| Vintage capital models, replacement echoes,
dynamic model solving, medium-term dynamics |
Keywords |
| C68, C63, E22 |
JEL classification |
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