Stochastic Optimal Growth with Nonconvexities

Kazuo Nishimura, Ryszard Rudnicki () and John Stachurski ()
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Ryszard Rudnicki: University of Silesia
John Stachurski: Australian National University

Chapter Chapter 11 in Nonlinear Dynamics in Equilibrium Models, 2012, pp 261-288 from Springer

Abstract: Abstract The stochastic optimal growth model (Brock and Mirman 1972) is a foundation stone of modern macroeconomic and econometric research. To accommodate the data, however, economists are often forced to go beyond the convex production tech- nology used in these original studies. Nonconvexities lead to technical difficulties which applied researchers would rather not confront. Value functions are in general no longer smooth, optimal policies contain jumps, and the Euler equation may not hold.

Keywords: Euler Equation; Optimal Policy; Marginal Distribution; Optimal Path; Markov Operator (search for similar items in EconPapers)
Date: 2012
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Journal Article: Stochastic optimal growth with nonconvexities (2006)
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DOI: 10.1007/978-3-642-22397-6_11

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