Differential-difference equations in economics: On the numerical solution of vintage capital growth models

Boucekkine, Raouf;Licandro-Goldaracena, Omar;Paul, Christopher
(1997) Journal of Economic Dynamics and Control — Vol. 21, n° 2/3, p. 347-362 (1997)

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Authors
  • Boucekkine, RaoufUniversidad Carlos III de Madrid
    Author
  • Licandro-Goldaracena, OmarFEDEA
    Author
  • Paul, ChristopherManchester university
    Author
Abstract
We examine techniques for the analytical and numerical solution of state-dependent differential-difference equations. Such equations occur in the continuous-time modelling of vintage capital growth models, which form an important class of models in modern economic growth theory. The theoretical treatment of non-state-dependent differential-difference equations in economics was 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 simple examples to illustrate our discussion. In addition, we apply this numerical method to the Solow vintage capital growth model.
Affiliations
  • Universidad Carlos III de MadridDepartamento de economía
  • FEDEA
  • Manchester universityDepartment of mathematics

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Boucekkine, R., Licandro-Goldaracena, O., & Paul, C. (1997). Differential-difference equations in economics: On the numerical solution of vintage capital growth models. Journal of Economic Dynamics and Control, 21(2/3), 347-362. https://doi.org/10.1016/S0165-1889(96)00935-9 (Original work published 1997)