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Saddle-node bifurcations in an optimal growth model with preferences for wealth habit

Author

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  • Sağlam Çağri
  • Turan Agah
  • Turan Hamide

    (Department of Economics, Bilkent University, Turkey)

Abstract

This paper studies the dynamic implications of preferences for wealth habit in a one-sector optimal growth model. We show that the dynamics may encounter saddle-node bifurcations with respect to the parameters of the preferences: the relative weight of wealth in utility and the degree of wealth habit. We analytically provide the monotone comparative statics and the continuity of the critical capital stock with respect to the discount factor, the relative weight of wealth in utility and the degree of wealth habit.

Suggested Citation

  • Sağlam Çağri & Turan Agah & Turan Hamide, 2014. "Saddle-node bifurcations in an optimal growth model with preferences for wealth habit," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 18(2), pages 1-12, April.
    • Handle: RePEc:bpj:sndecm:v:18:y:2014:i:2:p:12:n:1
    DOI: 10.1515/snde-2012-0050
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    Cited by:

    1. Yetkiner, Hakan & Nazlioglu, Saban, 2018. "Is there an optimal level of housing wealth in the long-run? Theory and evidence," Research in International Business and Finance, Elsevier, vol. 46(C), pages 257-267.

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