Neoclassical Growth Model with Two Fixed Delays

19 Pages Posted: 29 May 2020

See all articles by luca guerrini

luca guerrini

affiliation not provided to SSRN

Akio Matsumoto

Chuo University

Ferenc Szidarovszky

University of Arizona - Department of Systems & Industrial Engineering (SIE)

Date Written: July 2019

Abstract

“Delay” has been considered as one of destabilizing factors in economic dynamics for a long time. Dynamic macroeconomics is concerned with explaining growth and fluctuations. This paper shows how various dynamics involving cyclic fluctuations can emerge in the standard neoclassical growth model when two distinct delays, a delay in production and a delay in depreciation, are explicitly taken into account. We first confirm that the production delay has a stabilizing effect and the depreciation delay has a destabilizing effect in a one‐delay model. We then determine the stability switching curve analytically in the two delay model. It is shown that cyclic fluctuations emerge via Hopf bifurcation when stability is lost. It is also found that stability loss and gain repeatedly occur. Numerical examples verify the theoretical results when the Cobb‐Douglas production function is adopted.

Keywords: Delay differential equation, Hopf bifurcation, Neoclassical growth model, Stability crossing curve, Two fixed delays

Suggested Citation

guerrini, luca and Matsumoto, Akio and Szidarovszky, Ferenc, Neoclassical Growth Model with Two Fixed Delays (July 2019). Metroeconomica, Vol. 70, Issue 3, pp. 423-441, 2019, Available at SSRN: https://ssrn.com/abstract=3613978 or http://dx.doi.org/10.1111/meca.12257

Luca Guerrini (Contact Author)

affiliation not provided to SSRN

Akio Matsumoto

Chuo University ( email )

2nd floor Blg 4 Tampa Campus
742-1 Higashinakano, Hachioji
Tokyo 192-03
Japan

Ferenc Szidarovszky

University of Arizona - Department of Systems & Industrial Engineering (SIE) ( email )

Tucson, AZ
United States
520-621-6557 (Phone)

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