HOPF CYCLES IN ONE-SECTOR OPTIMAL GROWTH MODELS WITH TIME DELAY

Hitay Özbay, Hüseyin Çağrı Sağlam and Mustafa Kerem Yüksel ()

Macroeconomic Dynamics, 2017, vol. 21, issue 8, 1887-1901

Abstract: This paper analyzes the existence of Hopf bifurcation and establishes the conditions under which the equilibrium path converges toward periodic solutions in a one-sector optimal growth model with delay. We establish the limits and the possibilities of nonlinear dynamics (i.e., cycles) vis-à-vis delays. In particular, we formulate a new method to further comprehend the root distribution of the characteristic equation of a standard optimal growth model with delayed investment structure. We show that nonmonotonic dynamics (limit cycles, persistent oscillations) occurs when the delayed investment causes permanent adjustment failures among the economic variables in the economy.

Date: 2017
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