2021
DOI: 10.48550/arxiv.2110.00360
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Capital Demand Driven Business Cycles: Mechanism and Effects

Karl Naumann-Woleske,
Michael Benzaquen,
Maxim Gusev
et al.

Abstract: We develop a tractable macroeconomic model that captures dynamic behaviors across multiple timescales, including business cycles. The model is anchored in a dynamic capital demand framework reflecting an interactions-based process whereby firms determine capital needs and make investment decisions on a micro level. We derive equations for aggregate demand from this micro setting and embed them in the Solow growth economy. As a result, we obtain a closed-form dynamical system with which we study economic fluctu… Show more

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References 42 publications
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