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Discrete Versus Continuous Time in an Endogenous Growth Model with Durable Consumption

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  • Gómez Manuel A.

    (University of A Coruña – Department of Applied Economics II, A Coruña, Spain)

Abstract

The choice of time as a discrete or continuous variable may radically affect the stability of equilibrium in an endogenous growth model with durable consumption. In the continuous-time model the steady state is locally saddle-path stable with monotonic convergence. However, in the discrete-time model the steady state may be unstable or saddle-path stable with monotonic or oscillatory convergence.

Suggested Citation

  • Gómez Manuel A., 2014. "Discrete Versus Continuous Time in an Endogenous Growth Model with Durable Consumption," Mathematical Economics Letters, De Gruyter, vol. 2(3-4), pages 67-75, November.
    • Handle: RePEc:bpj:maecol:v:2:y:2014:i:3-4:p:9:n:6
    DOI: 10.1515/mel-2014-0012
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    References listed on IDEAS

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    1. Schmitt-Grohe, Stephanie & Uribe, Martin, 1997. "Balanced-Budget Rules, Distortionary Taxes, and Aggregate Instability," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 976-1000, October.
    2. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-357, April.
    3. Luis A. Puch & Omar Licandro, 2006. "Is Discrete Time a Good Representation of Continuous Time?," Working Papers 2006-20, FEDEA.
    4. Bambi, Mauro & Gori, Franco, 2014. "Unifying Time-To-Build Theory," Macroeconomic Dynamics, Cambridge University Press, vol. 18(8), pages 1713-1725, December.
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    Keywords

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    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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