Time as an Endogenous Random Variable Smoothly Embedded into Preference Manifold

Darong Dai

MPRA Paper from University Library of Munich, Germany

Abstract: A general equilibrium model has been constructed in a stochastic endogenous growth economy driven by an Ito-Levy diffusion process. The minimum time to “economic maturity” for an underdeveloped economy has been computed both in the preference manifold of the modified Ramsey fashion and in that of the modified Radner fashion with its support, i.e., fiscal policies and savings strategy, endogenously determined. Furthermore, the effects of different information structures to the endogenous time have been thoroughly investigated, and local sensitivity analyses of optimal consumption per capita with respect to the initial level of capital stock per capita have been smoothly incorporated into the current macroeconomic model.

Keywords: Stochastic endogenous growth; Minimum time to “economic maturity”; Optimal taxation policies; Endogenous savings rate; Preference manifold; Information structure; Local sensitivity analyses; Optimal stopping time; Levy diffusion (search for similar items in EconPapers)
JEL-codes: C61 D82 D91 E62 H21 O11 (search for similar items in EconPapers)
Date: 2011-10-01
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