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Title:Investment behavior in dynamic computable general equilibrium models for transition economies PDF Logo
Authors:Piazolo, Daniel
Issue Date:1998
Series/Report no.:Kiel Working Papers 879
Abstract:This paper suggests a method of approximating the development of investment in transition economies through an amendment of the standard adjustment cost formulation for investment within dynamic Computable General Equilibrium (CGE) models. Letting adjustment cost depend on the difference between the investment levels of two periods (rather than only on the gross investment ratio) leads to an investment behavior of the representative household that resembles the observed time paths of investment in transition countries. In contrast to standard adjustment costs, which predict a sharp rise in investment due to the high marginal productivity of each unit of capital after a capital shock, augmented adjustment costs lead to a gradual rise in investment.
Subjects:Computable General Equilibrium Model
Transition
Adjustment Costs
Investment Behavior
JEL:D58
P20
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des IfW
Kieler Arbeitspapiere, IfW

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