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The short-run dynamics of optimal growth models with delays

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  • Luis A. Puch
  • Fabrice Collard
  • Omar Licandro

Abstract

Differential equations with advanced and delayed time arguments may arise in the optimality conditions of simple growth models with delays. Models with investment gestation lags (time-to-build), consumption gestation lags (habit formation) or learning by using lie in this category. In this paper, we propose a shooting method to deal with leads and lags in the Euler system associated to dynamic general equilibrium models in continuous time. We introduce the discussion describing the dynamics that emerge under various assumptions on learning by using and gestation lags. Then, we implement the numerical method we propose to solve for the short run dynamics of a neoclassical growth model with a simple time--to--build lag.

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Bibliographic Info

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2004 with number 117.

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Date of creation: 11 Aug 2004
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Handle: RePEc:sce:scecf4:117

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Keywords: Time--to--build; Shooting method; DDEs;

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  1. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, December.
  2. Boucekkine, Raouf & Del Rio, Fernando & Licandro, Omar, 2000. "Vintage capital and the dynamics of the AK model," CEPREMAP Working Papers (Couverture Orange) 0003, CEPREMAP.
  3. Boucekkine, R. & Germain, M. & Licandro, O., . "Replacement echoes in the vintage capital growth model," CORE Discussion Papers RP -1275, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Asea, Patrick K. & Zak, Paul J., 1999. "Time-to-build and cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 23(8), pages 1155-1175, August.
  5. Boucekkine, Raouf & Licandro, Omar & Paul, Christopher, 1997. "Differential-difference equations in economics: On the numerical solution of vintage capital growth models," Journal of Economic Dynamics and Control, Elsevier, vol. 21(2-3), pages 347-362.
  6. Jody Overland & Christopher D. Carroll & David N. Weil, 2000. "Saving and Growth with Habit Formation," American Economic Review, American Economic Association, vol. 90(3), pages 341-355, June.
  7. Benhabib, Jess & Rustichini, Aldo, 1991. "Vintage capital, investment, and growth," Journal of Economic Theory, Elsevier, vol. 55(2), pages 323-339, December.
  8. Raouf Boucekkine & David de la Croix & Omar Licandro, 2006. "Vintage Capital," Economics Working Papers ECO2006/8, European University Institute.
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Cited by:
  1. Mauro Bambi, 2006. "Endogenous growth and time to build: the AK case," Computing in Economics and Finance 2006 77, Society for Computational Economics.
  2. BOUCEKKINE, RAOUF & de la CROIX, David & LICANDRO, Omar, 2004. "Modelling vintage structures with DDEs : principles and applications," CORE Discussion Papers 2004047, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Ulrich Brandt-Pollmann & Ralph Winkler & Sebastian Sager & Ulf Moslener & Johannes Schlöder, 2008. "Numerical Solution of Optimal Control Problems with Constant Control Delays," Computational Economics, Society for Computational Economics, vol. 31(2), pages 181-206, March.
  4. M. Bambi & G. Fabbri & F. Gozzi, 2012. "Optimal policy and consumption smoothing effects in the time-to-build AK model," Economic Theory, Springer, vol. 50(3), pages 635-669, August.
  5. Simon Sosvilla-Rivero & Pedro Rodriguez, 2010. "Linkages in international stock markets: evidence from a classification procedure," Applied Economics, Taylor & Francis Journals, vol. 42(16), pages 2081-2089.
  6. Francesco Ricci, 2007. "Environmental policy and growth when inputs are differentiated in pollution intensity," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 38(3), pages 285-310, November.
  7. José A. Herce, . "Could this ever happen in Spain? Economic and policy aspects of a SARS-like episode," Working Papers 2004-09, FEDEA.
  8. Raouf Boucekkine & Giorgio Fabbri & Patrick-Antoine Pintus, 2011. "On the optimal control of a linear neutral differential equation arising in economics," Working Papers halshs-00576770, HAL.
  9. Mauro Bambi & Omar Licandro, 2011. "Endogenous Growth and Wave-Like Business Fluctuation," Working Papers 533, Barcelona Graduate School of Economics.

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