Investment behavior in dynamic computable general equilibrium models for transition economies

Arbeitspapier

This paper suggests a method of approximating the development of investment in transition economies through an amendment of the standard adjustment cost formulation for investment within dynamic Computable General Equilibrium (CGE) models. Letting adjustment cost depend on the difference between the investment levels of two periods (rather than only on the gross investment ratio) leads to an investment behavior of the representative household that resembles the observed time paths of investment in transition countries. In contrast to standard adjustment costs, which predict a sharp rise in investment due to the high marginal productivity of each unit of capital after a capital shock, augmented adjustment costs lead to a gradual rise in investment.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Year: 1998 ; Kiel: Institut für Weltwirtschaft (IfW)

Classification and Topics

• Classification: Wirtschaft ; Computable and Other Applied General Equilibrium Models ; Socialist Systems and Transitional Economies: General
• Subject: Computable General Equilibrium Model ; Transition ; Adjustment Costs ; Investment Behavior ; Dynamisches Gleichgewicht ; Anpassungskosten ; Investition ; Osteuropa

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Piazolo, Daniel
• Event: Veröffentlichung
• (who): Kiel Institute of World Economics (IfW) ; ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel
• (when): 1998

Further information

• Handle: http://hdl.handle.net/10419/46804
• Last update: 10.03.2025, 11:45 AM CET