Continuous vs Discrete Time Modelling in Growth and Business Cycle Theory

  1. Omar Licandro 1
  2. Luis A. Puch 2
  3. Jesús Ruiz 2
  1. 1 University of Nottingham
    info

    University of Nottingham

    Nottingham, Reino Unido

    ROR https://ror.org/01ee9ar58

  2. 2 Universidad Complutense de Madrid
    info

    Universidad Complutense de Madrid

    Madrid, España

    ROR 02p0gd045

Revista:
Documentos de Trabajo (ICAE)

ISSN: 2341-2356

Any de publicació: 2018

Número: 28

Pàgines: 1-27

Tipus: Document de treball

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Altres publicacions en: Documentos de Trabajo (ICAE)

Resum

Economists model time as continuous or discrete. For long, either alternative has brought about relevant economic issues, from the implementation of the basic Solow and Ramsey models of growth and the business cycle, towards the issue of equilibrium indeterminacy and endogenous cycles. In this paper, we introduce to some of those relevant issues in economic dynamics. First, we describe a baseline continuous vs discrete time modelling setting relevant for questions in growth and business cycle theory. Then we turn to the issue of local indeterminacy in a canonical model of economic growth with a pollution externality whose size is related to the model period. Finally, we propose a growth model with delays to show that a discrete time representation implicitly imposes a particular form of time–to–build to the continuous time representation. Our approach suggests that the recent literature on continuous time models with delays should help to bridge the gap between continuous and discrete time representations in economic dynamics.

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Informació de finançament

Finally, we thank the financial support from the Spanish Ministerio de Economía y Competitividad (grant ECO2014-56676) and the Bank of Spain (grant Excelencia 2016-17).

Finançadors

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