(In)determinacy and Time-to-Build
This paper generalizes Benhabib and Farmer , by allowing for a strictly positive time-to-build of capital. The introduction of a time-to-build delay yields a system of mixed functional di¤erential equations. We show that the system has a unique steady state. More important, we prove that the dimension of the unstable manifold is at least one, which implies that a small time-to-build delay rules out local indeterminacy.
|Date of creation:||2004|
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