Mean Growth and Stochastic Stability in Endogenous Growth Models

Raouf Boucekkine (), Patrick Pintus and Benteng Zou

Working Papers from HAL

Abstract: Under uncertainty, mean growth of, say, wealth is often defined as the growth rate of average wealth, but it can alternatively be defined as the average growth rate of wealth. We argue that stochastic stability points to the latter notion of mean growth as the theoretically relevant one. Our discussion is cast within the class of continuous-time AK-type models subject to geometric Brownian motions. First, stability concepts related to stochastic linear homogenous differential equations are introduced and applied to the canonical AK model. It is readily shown that exponential balanced-growth paths are not robust to uncertainty. In a second application, we evaluate the quantitative implications of adopting the stochastic-stability-related concept of mean growth for the comparative statics of global diversification in the seminal model due to Obstfeld (1994).

Keywords: stochastic stability; AK model; global diversification; endogenous stochastic growth; mean growth (search for similar items in EconPapers)
Date: 2018-02
New Economics Papers: this item is included in nep-gro
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01705300v1
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Mean growth and stochastic stability in endogenous growth models (2018)
Working Paper: Mean Growth and Stochastic Stability in Endogenous Growth Models (2018)
Working Paper: Mean growth and stochastic stability in endogenous growth models (2018)
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