Luis A. Puch

Capital Utilization, Maintenance Costs and the Business Cycle

In this paper we analyze the role played by capacity utilization and maintenance costs in the propagation of aggregate fluctuations. To this purpose we use an extension of the general equilibrium stochastic growth model that incorporates a depreciation technology depending both upon capital utilization (depreciation in use assumption) and maintenance costs. In addition, we argue that the maintenance activity must be countercyclical, because it is cheaper for the firm to repair and maintain machines when they are stopped than when machines are being employed. We show that the propagation mechanism associated to our technology assumption is quantitatively important: the countercyclicality of maintenance costs contributes significantly to magnify and propagate aggregate fluctuations.

The short-run Dynamics of Optimal Growth Model with Delays.

Differential equations with advanced and delayed time arguments may arise in the optimality conditions of simple growth models with delays. Models with investment gestation lags (time-to-build), consumption gestation lags (habit formation) or learning by using lie in this category. In this paper, we propose a shooting method to deal with leads and lags in the Euler system associated to dynamic general equilibrium models in continuous time. We introduce the discussion describing the dynamics that emerge under various assumptions on learning by using and gestation lags. Then, we implement the numerical method we propose to solve for the short run dynamics of a neoclassical growth model with a simple time-to-build lag.

A Vintage Model of Trade in Secondhand Markets and the Lifetime of Durable Goods

How is the replacement of durable goods affected by the existence of a secondhand market? To answer this question, a vintage model of durable goods replacement is specified where efficient trade in used goods arises by assuming the existence of two types of consumers differentiated by income. The resulting steady state optimal replacement decision and secondhand market price are characterized, stressing the influence of economic depreciation. Compared to autarky, the consideration of an efficient secondhand market between high and low income people modifies the age profile of prices, increasing and decreasing for durable goods owned by high and low income people, respectively. Moreover, at the age at which used durable goods are traded, not only ask and bid prices are equal but also their age derivatives.

Continuous versus Discrete Time Modeling in Growth and Business Cycle Theory

Economists model time as continuous or discrete. For long, either alternative has brought about relevant economic issues, from the implementation of the basic Solow and Ramsey models of growth and the business cycle, towards the issue of equilibrium indeterminacy and endogenous cycles. In this paper, we introduce to some of those relevant issues in economic dynamics. First, we describe a baseline continuous vs discrete time modelling setting relevant for questions in growth and business cycle theory. Then we turn to the issue of local indeterminacy in a canonical model of economic growth with a pollution externality whose size is related to the model period. Finally, we propose a growth model with delays to show that a discrete time representation implicitly imposes a particular form of time–to–build to the continuous time representation. Our approach suggests that the recent literature on continuous time models with delays should help to bridge the gap between continuous and discrete time representations in economic dynamics.

Investment, Technological Progress and Energy Efficiency

In this paper we propose a macroeconomic model where energy intensity at the macro level responds to changes in energy prices and technological innovations. In our theory those changes operate through the choice of energy efficiency, which is embodied in new vintages of capital that differ due to Investment Specific Technological Change. Higher ISTC acts as an energy saving device. If energy prices stay constant, a permanent increase in the growth rate of ISTC may rise energy intensity in the long run, producing a rebound effect. This is so because the combination of higher ISTC growth rate and constant energy prices makes agents to choose less energy efficient capital goods. This may not be the case with rising energy prices. Thus, our theory can be used to test when and how we should see a rebound effect in energy use at the aggregate level and can be used to evaluate the aggregate effect of any policy aiming to reduce energy use.

Long-Run and Business Cycle Factors of the Spanish Economy

The construction of a model for simulation and policy evaluation of the Spanish economy constitutes a far-reaching project. This research task involves the specification of the behavioural equations that better describe the economy, as will be explained in the next chapter. Growth and cyclical regularities impose several restrictions on the specification and calibration of a useful general equilibrium model. For this reason much effort is needed in the analysis of the long-and short-run stylised factors of the Spanish economy. Thus throughout this chapter we shall study what has been behind the pattern of growth of the Spanish economy in recent decades, what has determined its labour productivity and what are the special features characterising business cycles in Spain.