Differential-Difference Equations in Economics: On the Numerical Solution of Vintage Capital Growth Models

Raouf Boucekkine (), Omar Licandro () and Christopher Paul ()
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Christopher Paul: Mathematics Department, Manchester University

Computing in Economics and Finance 1996 from Society for Computational Economics

Abstract: In this paper, we examine techniques for the analytical and numerical solution of statedependent differential-difference equations. Such equations occur in the continuous time modelling of vintage capital growth models, which form a particularly important class of models in modern economic growth theory. The theoretical treatment of non-statedependent differential-difference equations in economics has already been discussed by Benhabib and Rustichini (1991). In general, though, the state-dependence of a model prevents its analytical solution in all but the simplest of cases. We review a numerical method for solving state-dependent models, using some simple examples to illustrate our discussion. In addition, we analyse the Solow vintage capital growth model. We conclude by mentioning a crucial unresolved issue related to this topic.

Keywords: Economic growth theory; vintage capital; differential-difference equations; state-dependence; numerical solution. (search for similar items in EconPapers)
JEL-codes: C63 E32 O40 (search for similar items in EconPapers)
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Journal Article: Differential-difference equations in economics: On the numerical solution of vintage capital growth models (1997)
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