Saddle-node bifurcations in an optimal growth model with preferences for wealth habit

Çağrı Sağlam, Turan Agah and Turan Hamide
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Turan Agah: Department of Economics, Bilkent University, Turkey
Turan Hamide: Department of Economics, Bilkent University, Turkey

Studies in Nonlinear Dynamics & Econometrics, 2014, vol. 18, issue 2, 145-156

Abstract: This paper studies the dynamic implications of preferences for wealth habit in a one-sector optimal growth model. We show that the dynamics may encounter saddle-node bifurcations with respect to the parameters of the preferences: the relative weight of wealth in utility and the degree of wealth habit. We analytically provide the monotone comparative statics and the continuity of the critical capital stock with respect to the discount factor, the relative weight of wealth in utility and the degree of wealth habit.

Keywords: Wealth habit; Threshold dynamics; Saddle-node bifurcation (search for similar items in EconPapers)
JEL-codes: C61 D90 O41 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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DOI: 10.1515/snde-2012-0050

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