Stochastic Stability of Endogenous Growth: The AK Case

Raouf Boucekkine () and Benteng Zou

No 1454, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: This note studies the stochastic stability of the standard AK growth model under uncertain output technology. Capital accumulation follows a stochastic linear 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 collapses 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)
Pages: 11 pages
Date: 2014-12
New Economics Papers: this item is included in nep-gro
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Citations: View citations in EconPapers (6)

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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:aim:wpaimx:1454

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