The short-run dynamics of optimal growyh models with delays

Abstract

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.