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Neoclassical growth model with two fixed delays
Author(s) -
Guerrini Luca,
Matsumoto Akio,
Szidarovszky Ferenc
Publication year - 2019
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/meca.12257
Subject(s) - depreciation (economics) , economics , hopf bifurcation , stability (learning theory) , production (economics) , function (biology) , bifurcation , growth model , dynamics (music) , mathematical economics , econometrics , physics , nonlinear system , microeconomics , computer science , profit (economics) , quantum mechanics , machine learning , evolutionary biology , financial capital , acoustics , capital formation , biology
“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.