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Time preference and cyclical endogenous growth

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  • Gomes, Orlando

Abstract

The paper develops an AK endogenous growth model with an endogenously determined rate of intertemporal preference. Following some of the related literature, we assume that the degree of impatience that is revealed by the representative agent, regarding future consumption, depends on income. To be precise, the proposed framework establishes a link between the output gap and the discount rate attached to the sequence of future utility functions. We analyze both local and global dynamics. From a local analysis point of view, a variety of stability results is possible to obtain, depending on parameter values. The study of global dynamics allows to find endogenous business cycles under some reasonable circumstances. On a second stage, the model is extended to include the role of leisure.

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File URL: http://mpra.ub.uni-muenchen.de/3282/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3282.

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Date of creation: May 2007
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Handle: RePEc:pra:mprapa:3282

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Keywords: Time preference; Endogenous growth; Endogenous fluctuations; Quasiperiodic orbits;

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  1. Caballe, Jordi & Jarque, Xavier & Michetti, Elisabetta, 2006. "Chaotic dynamics in credit constrained emerging economies," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 30(8), pages 1261-1275, August.
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  3. Christiano, Lawrence J. & G. Harrison, Sharon, 1999. "Chaos, sunspots and automatic stabilizers," Journal of Monetary Economics, Elsevier, Elsevier, vol. 44(1), pages 3-31, August.
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  7. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
  8. Cellarier, Laurent, 2006. "Constant gain learning and business cycles," Journal of Macroeconomics, Elsevier, Elsevier, vol. 28(1), pages 51-85, March.
  9. Boldrin, Michele & Nishimura, Kazuo & Shigoka, Tadashi & Yano, Makoto, 2001. "Chaotic Equilibrium Dynamics in Endogenous Growth Models," Journal of Economic Theory, Elsevier, Elsevier, vol. 96(1-2), pages 97-132, January.
  10. Jang-Ting Guo & Kevin Lansing, 1999. "Fiscal policy, increasing returns, and endogenous fluctuations," Working Papers in Applied Economic Theory, Federal Reserve Bank of San Francisco 99-08, Federal Reserve Bank of San Francisco.
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  12. Nishimura, Kazuo & Yano, Makoto, 1995. "Nonlinear Dynamics and Chaos in Optimal Growth: An Example," Econometrica, Econometric Society, Econometric Society, vol. 63(4), pages 981-1001, July.
  13. Yves Balasko & Christian Ghiglino, 1993. "The Existence of Endogenous Cycles," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva, Institut d'Economie et Econométrie, Université de Genève 93.03, Institut d'Economie et Econométrie, Université de Genève.
  14. Drugeon, Jean-Pierre, 1996. "Impatience and long-run growth," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 20(1-3), pages 281-313.
  15. Nishimura, Kazuo & Sorger, Gerhard & Yano, Makoto, 1994. "Ergodic Chaos in Optimal Growth Models with Low Discount Rates," Economic Theory, Springer, Springer, vol. 4(5), pages 705-17, August.
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  17. repec:cup:macdyn:v:6:y:2002:i:5:p:633-64 is not listed on IDEAS
  18. Jean-Pierre Drugeon, 1998. "A model with endogenously determined cycles, discounting and growth," Economic Theory, Springer, Springer, vol. 12(2), pages 349-369.
  19. Palivos, Theodore & Wang, Ping & Zhang, Jianbo, 1997. "On the Existence of Balanced Growth Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 205-24, February.
  20. Becker, Gary S & Mulligan, Casey B, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(3), pages 729-58, August.
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Cited by:
  1. Mauro Sodini, 2011. "Local and Global Dynamics in an Overlapping Generations Model with Endogenous Time Discounting," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 38(3), pages 277-293, October.

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