Asymptotic Growth under Uncertainty: Existence and Uniqueness

Fwu-Ranq Chang and Anastasios Malliaris

Chapter 1 in Economic Uncertainty, Instabilities and Asset Bubbles:Selected Essays, 2005, pp 3-8 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThis paper demonstrates, using the Reflection Principle, the existence and uniqueness of the solution to the classic Solow equation under continuous time uncertainty for the class of strictly concave production functions which are continuously differentiable on the nonnegative real numbers. This class contains all CES functions with elasticity of substitution less than unity. A steady state distribution also exists for this class of production functions which have a bounded slope at the origin. A condition on the drift-variance ratio of the stochastic differential equation alone, independent of technology and the savings ratio, is found to be necessary for the existence of a steady state.

Keywords: Asymptotic Economic Growth; Inflation; Interest Rates; Asset Pricing; Equity Markets; Foreign Currency; Monetary Policy; Crash (search for similar items in EconPapers)
JEL-codes: C58 C73 E31 E37 E43 G12 G17 (search for similar items in EconPapers)
Date: 2005
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Journal Article: Asymptotic Growth under Uncertainty: Existence and Uniqueness (1987)
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