Stochastic stability of endogenous growth: The AK case

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: This note studies the stochastic stability of the standard AK growth model un- der uncertain output technology. Capital accumulation follows a stochastic lin- ear homogenous differential equation. It’s shown that exponential balanced paths, which characterize optimal trajectories in the absence of uncertainty, are not robust to uncertainty. Precisely, it’s demonstrated that the economy almost surely col- lapses at exponential speed even though productivity is initially arbitrarily high.

Keywords: Optimal growth; AK model; Ito stochastic differential equation; balanced growth paths; stochastic stability (search for similar items in EconPapers)
JEL-codes: C61 C62 O40 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-gro and nep-hpe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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https://hdl.handle.net/10993/19675 (application/pdf)

Related works:
Working Paper: Stochastic Stability of Endogenous Growth: The AK Case (2014)
Working Paper: Stochastic Stability of Endogenous Growth: The AK Case (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:14-30

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