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Neoclassical growth model with two fixed delays

Author

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  • Luca Guerrini
  • Akio Matsumoto
  • Ferenc Szidarovszky

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.

Suggested Citation

  • Luca Guerrini & Akio Matsumoto & Ferenc Szidarovszky, 2019. "Neoclassical growth model with two fixed delays," Metroeconomica, Wiley Blackwell, vol. 70(3), pages 423-441, July.
    • Handle: RePEc:bla:metroe:v:70:y:2019:i:3:p:423-441
    DOI: 10.1111/meca.12257
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    Cited by:

    1. Matsumoto, Akio & Szidarovszky, Ferenc, 2020. "Delay growth model augmented with physical and human capitals," Chaos, Solitons & Fractals, Elsevier, vol. 130(C).
    2. Matsumoto, Akio & Szidarovszky, Ferenc, 2023. "Delay Solow Model with a Normalized CES Production Function," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 305-323.

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