The Replacement Problem

Posted: 27 Apr 1998

See all articles by Thomas F. Cooley

Thomas F. Cooley

New York University - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER)

Jeremy Greenwood

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Mehmet Yorukoglu

University of Chicago - Department of Economics; University of Rochester

Date Written: 1995

Abstract

We construct a vintage capital model of economic growth in which the decision to replace old technologies with new ones is modeled explicitly. Depreciation in this environment is an economic, not a physical concept. We describe the balanced growth paths and the transitional dynamics of this economy. We illustrate the importance of vintage capital by analyzing the response of the economy to fiscal policies designed to stimulate investment in new technologies.

A revised version of this paper is published in the Journal of Monetary Economics, v. 40, no. 3(December 1997):457-499.

JEL Classification: O4

Suggested Citation

Cooley, Thomas F. and Greenwood, Jeremy and Yorukoglu, Mehmet, The Replacement Problem (1995). Simon School of Business Working Paper MP 95-02. Available at SSRN: https://ssrn.com/abstract=3245

Thomas F. Cooley (Contact Author)

New York University - Leonard N. Stern School of Business ( email )

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Jeremy Greenwood

University of Pennsylvania - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Mehmet Yorukoglu

University of Chicago - Department of Economics ( email )

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Chicago, IL 60637
United States
773-702-8254 (Phone)

University of Rochester

Rochester, NY 14627
United States

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