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The short-run dynamics of optimal growth models with delays

  • Luis A. Puch
  • Fabrice Collard
  • Omar Licandro

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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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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  1. Raouf Boucekkine & Omar Licandro & Christopher Paul, . "Differential-Difference Equations in Economics: On the Numerical Solution of Vintage Capital Growth Models," Computing in Economics and Finance 1996 _036, Society for Computational Economics.
  2. R. Boucekkine & F. del Rio & O. Licandro & Luis A. Puch, 2000. "Vintage Capital and the Dynamics of the AK Model," Econometric Society World Congress 2000 Contributed Papers 0436, Econometric Society.
  3. Benhabib, Jess & Rustichini, Aldo, 1990. "Vintage Capital, Investment And Growth," Working Papers 90-22, C.V. Starr Center for Applied Economics, New York University.
  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. Raouf Boucekkine & David de la Croix & Omar Licandro, 2006. "Vintage Capital," Economics Working Papers ECO2006/8, European University Institute.
  6. Christopher D. Carroll & Jody Overland & David N. Weil, 1995. "Saving and growth with habit formation," Finance and Economics Discussion Series 95-42, Board of Governors of the Federal Reserve System (U.S.).
  7. Boucekkine, Raouf & Germain, Marc & Licandro, Omar, 1997. "Replacement Echoes in the Vintage Capital Growth Model," Journal of Economic Theory, Elsevier, vol. 74(2), pages 333-348, June.
  8. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, June.
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