Stability under Learning: the Endogenous Growth Problem

Orlando Gomes

No ercwp1708, Working Papers Series 1 from ISCTE-IUL, Business Research Unit (BRU-IUL)

Abstract: A local dynamic analysis, in the neighborhood of the steady-state, is developed for one and two-sector endogenous growth models. The problem differs from the conventionally assumed growth setups because one considers that expectations concerning the next period value of the control variable (consumption) are formed through adaptive learning. In such scenario, the found stability conditions reveal that convergence to the unique steady-state point is feasible if a minimum requirement regarding the quality of learning in the long run equilibrium is fulfilled. Therefore, stability of growth under learning is dependentent on the efficiency with which expectations are generated.

Keywords: Endogenous Growth; Adaptive Learning; Stability Analysis. (search for similar items in EconPapers)
JEL-codes: C62 D83 O41 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2008-06-15
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Journal Article: Stability under learning: The endogenous growth problem (2009)
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