A growth-cycle model of Solow-Swan type, I
AbstractWe construct an endogenous growth-cycle model of the Solow-Swan type. The equilibrium point of the growth-cycle model is the same as the steady state of the Solow-Swan growth model. Unlike in the Solow-Swan growth model, the representative household in the growth-cycle model, however, adaptively estimates his/her average income and determines his/her consumption in proportion to average income. We prove that if the steady state is unstable, any non-equilibrium path converges to a limit cycle. However, even if the steady state is stable, growth cycles can emerge. In fact, we prove that the growth-cycle model generates corridor stability. As a result, we prove that there exists an unstable cyclic path such that any path in the interior of the cyclic path converges to the steady state and any path in the exterior of the cyclic path tends toward a limit cycle (growth cycle). We also prove that a high economic growth rate is not compatible with a stable economy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Behavior & Organization.
Volume (Year): 76 (2010)
Issue (Month): 2 (November)
Contact details of provider:
Web page: http://www.elsevier.com/locate/jebo
Solow-Swan growth model Growth cycles Consumption function Poincare-Bendixson Theorem Limit cycles Corridor stability Hopf bifurcation;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Medio,Alfredo & Lines,Marji, 2001. "Nonlinear Dynamics," Cambridge Books, Cambridge University Press, number 9780521551861, December.
- Grasman, Johan & Wentzel, Jolanda J., 1994. "Co-existence of a limit cycle and an equilibrium in Kaldor's business cycle model and its consequences," Journal of Economic Behavior & Organization, Elsevier, vol. 24(3), pages 369-377, August.
- Boldrin, Michele & Montrucchio, Luigi, 1986. "On the indeterminacy of capital accumulation paths," Journal of Economic Theory, Elsevier, vol. 40(1), pages 26-39, October.
- Bohm, Volker & Kaas, Leo, 2000. "Differential savings, factor shares, and endogenous growth cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 965-980, June.
- Nishimura, Kazuo, 1985.
"Competitive equilibrium cycles,"
Journal of Economic Theory,
Elsevier, vol. 35(2), pages 284-306, August.
- T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
- Deneckere, Raymond & Pelikan, Steve, 1986. "Competitive chaos," Journal of Economic Theory, Elsevier, vol. 40(1), pages 13-25, October.
- Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
- Semmler, Willi & Sieveking, Malte, 1993. "Nonlinear liquidity-growth dynamics with corridor-stability," Journal of Economic Behavior & Organization, Elsevier, vol. 22(2), pages 189-208, October.
- Kind, Christoph, 1999. "Remarks on the economic interpretation of Hopf bifurcations," Economics Letters, Elsevier, vol. 62(2), pages 147-154, February.
- Benhabib, Jess & Nishimura, Kazuo, 1979. "The hopf bifurcation and the existence and stability of closed orbits in multisector models of optimal economic growth," Journal of Economic Theory, Elsevier, vol. 21(3), pages 421-444, December.
- Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
- Mankiw, N Gregory & Romer, David & Weil, David N, 1992.
"A Contribution to the Empirics of Economic Growth,"
The Quarterly Journal of Economics,
MIT Press, vol. 107(2), pages 407-37, May.
- Benhabib, Jess & Miyao, Takahiro, 1981. "Some New Results on the Dynamics of the Generalized Tobin Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(3), pages 589-96, October.
- Day, Richard H, 1982. "Irregular Growth Cycles," American Economic Review, American Economic Association, vol. 72(3), pages 406-14, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.