The Replacement Problem

descriptionPublicationkeyboard_double_arrow_right Article , Preprint 01 Dec 1994Publisher:Federal Reserve Bank of MinneapolisJournal:Journal of Monetary Economics, volume 40, pages 457-499 (issn: 0304-3932,

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Authors: Thomas F. Cooley; Jeremy Greenwood; Mehmet Yorukoglu;

doi: 10.21034/dp.95 , 10.1016/s0304-3932(97)00055-x

The Replacement Problem

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Abstract

Abstract A prototypical vintage capital model of economic growth is developed, where the decision to replace old technologies with new ones is modeled explicitly. Technological change is investment specific. Depreciation in this environment is an economic, not a physical, concept. The vintage capital economy's balanced-growth paths and transitional dynamics are analyzed. The transitional dynamics are markedly different from the standard neoclassical growth model.

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Keywords

Economic development

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