Analytical and Numerical Solution of a Poisson RBC model

Christoph Schlegel

No 05/04, Dresden Discussion Paper Series in Economics from Technische Universität Dresden, Faculty of Business and Economics, Department of Economics

Abstract: This paper analyses a RBC model in continuous time featuring deterministic incremental development of technology and stochastic fundamental inventions arriving according to a Poisson process. Other than in standard RBC models, shocks are uncorrelated, irregular and rather seldom. In two special cases analytical solutions are presented. In the general case a delay differential equation (DDE) has to be solved. Standard numerical solution methods fail, because the steady state is path dependent. A new solution based on a modified method of steps for DDEs provides not only approximations but also upper and lower bounds for optimal consumption path and steady state.

Keywords: Business cycle models with poisson shocks; RBC models in continuous time; Delay differential equations (search for similar items in EconPapers)
JEL-codes: C61 C65 C68 E32 O41 (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuddps:0504

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