Multiple Equilibria and Indeterminacy in an Optimal Growth Model with Endogenous Capital Depreciation
AbstractThis paper extends an otherwise standard one-sector neoclassical growth model by postulating that the depreciation rate of physical capital depends on the agent's efforts on maintenance and repairs. Specifically, we introduce endogenous depreciation into the standard optimal growth model via two different mechanisms and examine the steady state and the dynamics of the model economy qualitatively and quantitatively. We find that with plausibel parameter values, multiple equilibria and indeterminacy can arise in simply modified optimal growth model.
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Bibliographic InfoPaper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 392.
Length: 20 pages
Date of creation: 30 May 2010
Date of revision:
Multiple Equilibria; Indeterminacy; Endogenous Depreciation;
Find related papers by JEL classification:
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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