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Optimal policy and consumption smoothing effects in the time-to-build AK model. (English) Zbl 1246.91082
Summary: 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.

MSC:
91B62 Economic growth models
91B55 Economic dynamics
90C39 Dynamic programming
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