Preference shocks in an RBC model with intangible capital

Abstract

In this paper, we develop and simulate an RBC model that includes intangible capital as a third factor of production. We study the effects of intra-temporal preference shocks on economic aggregates, employing the undetermined coefficient method of to solve the model. Impulse response functions to preference shocks reveal that demand-side shocks are important in explaining the variations in macroeconomic aggregates.

Keywords

• intangible capital
• real business cycle
• preference/demand shocks