STOCHASTIC GROWTH WITH NONCONVEXITIES:THE OPTIMAL CASE

Kazuo Nishimura, Ryszard Rudnicki and John Stachurski ()

No 897, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: This paper studies optimal investment and dynamic behaviour of stochastically growing economies. We assume neither convex technology nor bounded support of the productivity shocks. A number of basic results concerning the investment policy and the Ramsey–Euler equation are established. We also prove a fundamental dichotomy pertaining to optimal growth models perturbed by standard econometric shocks: Either an economy is globally stable or it is globally collapsing to the origin.

Keywords: nonconvexities (search for similar items in EconPapers)
Pages: 39 pages
Date: 2004
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