Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/189321 
Year of Publication: 
2005
Series/Report no.: 
Queen's Economics Department Working Paper No. 1040
Publisher: 
Queen's University, Department of Economics, Kingston (Ontario)
Abstract: 
We develop a model of "intrinsic" business cycles, driven by the decentralized behaviour of entrepreneurs and firms making continuous, divisible improvements in their productivity. We show how equilibrium cycles, associated with strategic delays in implementation and endogenous innovation, arise even in the presence of reversible investment. We derive the implications for the cyclical evolution of both tangible (physical) and intangible (knowledge) capital. In particular, our framework is consistent with key aspects of the somewhat puzzling relationship between fixed capital formation and the stockmarket at business cycle frequencies.
Subjects: 
Tobin\'s Q
fixed capital formation
intangible investment
cycles and growth
JEL: 
E0
E3
O3
O4
Document Type: 
Working Paper

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