Stability analysis of Uzawa-Lucas endogenous growth model
William Barnett and
Taniya Ghosh
MPRA Paper from University Library of Munich, Germany
Abstract:
This paper analyzes, within its feasible parameter space, the dynamics of the Uzawa-Lucas endogenous growth model. The model is solved from a centralized social planner perspective as well as in the model’s decentralized market economy form. We examine the stability properties of both versions of the model and locate Hopf and transcritical bifurcation boundaries. In an extended analysis, we investigate the existence of Andronov-Hopf bifurcation, branch point bifurcation, limit point cycle bifurcation, and period doubling bifurcations. While these all are local bifurcations, the presence of global bifurcation is confirmed as well. We find evidence that the model could produce chaotic dynamics, but our analysis cannot confirm that conjecture. It is important to recognize that bifurcation boundaries do not necessarily separate stable from unstable solution domains. Bifurcation boundaries can separate one kind of unstable dynamics domain from another kind of unstable dynamics domain, or one kind of stable dynamics domain from another kind (called soft bifurcation), such as bifurcation from monotonic stability to damped periodic stability or from damped periodic to damped multiperiodic stability. There are not only an infinite number of kinds of unstable dynamics, some very close to stability in appearance, but also an infinite number of kinds of stable dynamics. Hence subjective prior views on whether the economy is or is not stable provide little guidance without mathematical analysis of model dynamics. When a bifurcation boundary crosses the parameter estimates’ confidence region, robustness of dynamical inferences from policy simulations are compromised, when conducted, in the usual manner, only at the parameters’ point estimates.
Keywords: bifurcation; endogenous growth; Lucas-Uzawa model; Hopf; inference robustness; dynamics; stability. (search for similar items in EconPapers)
JEL-codes: C1 C15 E0 E3 O4 O41 (search for similar items in EconPapers)
Date: 2013-05-27
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/47231/1/MPRA_paper_47231.pdf original version (application/pdf)
Related works:
Journal Article: Stability analysis of Uzawa–Lucas endogenous growth model (2014) 
Working Paper: Stability Analysis of Uzawa-Lucas Endogenous Growth Model (2013) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:47231
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().