The short-run Dynamics of Optimal Growth Model with Delays

Differential equations with advanced and delayed arguments arise in the optimality conditions of continuous time growth models with delays. In this paper, we use optimal control theory with delays, and we propose a shooting method to numerically deal with this class of models. We find that for a large delay the economy converges to steady state by oscillations, but consumption smoothing mitigates the induced echo effects through an advanced Euler-type differential equation.