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The study investigates how vintage capital features affect investment dynamics and growth, indicating their role in market volatility.
We study the dynamics of growth and investment in a continuous time model with vintage capital. Vintage capital models may be characterized by non-exponential rates of depreciation and technical change and can incorporate “gestation lags” as well as “learning by using.” We investigate the effect of such features on the dynamics of investment and growth and show how they can contribute to explaining the volatile nature of investment time-series.
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Benhabib et al. (1991) studied this question.
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