Notes on Continuous Dynamic Models: the Benhabib-Farmer Condition for Indeterminacy

Marco Guerrazzi

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: In these notes, starting from the discrete case, we provide some useful insights on the way in which are derived the necessary (and sometime) sufficient conditions for the solution of a maximum problem developed in continuous time. Moreover, we exploit such conditions to solve the Benhabib-Farmer (1994) model deriving the condition for an indeterminate equilibrium path. Finally, referring to the equilibrium condition of the labour market, we explain the mechanism that in the one-sector optimal growth model leads prophecies to be self-fulfilling.

Keywords: Maximum Problems in Continuous Time; Indeterminate Equilibria; and Self-Fulfilling Prophecies (search for similar items in EconPapers)
JEL-codes: E00 E3 O40 (search for similar items in EconPapers)
Date: 2005-01-01
Note: ISSN 2039-1854
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2005/54

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