The savings rate in a discrete-time Ramsey economy with CRRA preferences and full depreciation

Francisco Queirós

Economics Letters, 2025, vol. 253, issue C

Abstract: This paper studies the discrete-time version of the Ramsey model with CRRA preferences, a Cobb–Douglas production function and full depreciation. I show that, when the intertemporal elasticity of substitution (IES) is above one, the substitution effect of an interest rate increase always dominates the income effect; when the IES is below one, the income effect dominates.

Keywords: Ramsey model; CRRA utility; Savings rate; Income and substitution effects (search for similar items in EconPapers)
JEL-codes: E10 E21 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:253:y:2025:i:c:s0165176525002216

DOI: 10.1016/j.econlet.2025.112384

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