Fabrice Collard (),
Omar Licandro () and
Luis Puch ()
No 2006-16, Working Papers from FEDEA
In an optimal growth model with a time-to-build delay, the feasibility condition is a delayed-differential equation, and the Euler-type condition is an advanced-differential equation. As in Kalecki's theory of business cycles, the delayed nature of the feasibility constraint naturally induces cycles. However, the advanced nature of the Euler-type equation dampens fluctuations through smoothing, making the economy converge by oscillations. We refer to this result as time-to-build echoes.
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