Time-to-Build and Cycles

Patrick K. Asea, Paul J. Zak

NBER Technical Working Paper No. 211
Issued in May 1997
NBER Program(s):   IFM

We analyze the dynamics of a simple growth model in which production occurs with a delay while new capital is installed (time-to-build). The time-to-build technology is shown to yield a system of functional (delay) differential equations with a unique steady state. We demonstrate that the steady state, though typically a saddle, may exhibit Hopf cycles on a measurable set of the parameter space. Furthermore, the optimal path to the steady state is oscillatory. A counter-example to the claim that intrinsically oscillatory on the central technical apparatus the mathematics of functional differential equations.

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