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Article
Intangible capital in a real business cycle model
Economic Modelling
  • Kashif Zaheer Malik, Lahore University of Management Sciences
  • Syed Z Ali, Lahore University of Management Sciences
  • Ahmed M. Khalid, Bond University
Date of this Version
4-1-2014
Document Type
Journal Article
Publication Details

Citation only

Malid, K. Z., Ali, S. Z., Khalid, A. M. (2014). Intangible capital in a real business cycle model. Economic Modelling, 39, 32-48.

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© Copyright, Elsevier B.V., 2014

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Abstract

Recent empirical studies have shown that intangible capital plays an important role in explaining productivity gains that have occurred during the last two decades. By introducing intangible capital in an otherwise standard theoretical real business cycle model, this paper aims to provide a theoretical foundation of the empirical findings. Our results indicate that investment in intangible capital is pro-cyclical. Both transitory aswell as permanent productivity shocks increase investment in intangible capital. However, in case of a permanent technology shock we learn that firms allocate more labor and physical capital to the creation of intangible capital which increases future profits at the cost of current profit. We also find that investment in intangible capital plays an important role in producing endogenous movements in productivity.

Citation Information
Kashif Zaheer Malik, Syed Z Ali and Ahmed M. Khalid. "Intangible capital in a real business cycle model" Economic Modelling Vol. 39 (2014) p. 32 - 48 ISSN: 0264-9993
Available at: http://works.bepress.com/ahmed_khalid/19/