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Intangible investments and international business cycles

Author

Listed:
  • Guido Baldi

    (University of Bern
    German Institute for Economic Research (DIW Berlin))

  • André Bodmer

    (University of Bern)

Abstract

Intangible capital is an increasingly important factor of production in advanced economies. Governments in Europe and elsewhere promote investment in intangible assets. However, the potential role of intangibles for business cycles and the international transmission of shocks is not well understood. In this paper, we investigate the international business cycle effects of intangible capital. To this aim, we build an otherwise standard two-country real business cycle model augmented by a production sector for intangibles and allow for the non-rivalrous use of intangible capital in the production of final output goods and new intangibles. We find that a model including intangibles is associated with international co-movement of tangible investment, which is a feature observed in the data that many models fail to produce.

Suggested Citation

  • Guido Baldi & André Bodmer, 2017. "Intangible investments and international business cycles," International Economics and Economic Policy, Springer, vol. 14(2), pages 211-219, April.
    • Handle: RePEc:kap:iecepo:v:14:y:2017:i:2:d:10.1007_s10368-016-0339-1
    DOI: 10.1007/s10368-016-0339-1
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    Cited by:

    1. Guido Baldi & Andre Bodmer, 2018. "Intangible Capital Formation, International Equity Investments, and Output Synchronization," Diskussionsschriften dp1810, Universitaet Bern, Departement Volkswirtschaft.

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