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The savings rate in a discrete-time Ramsey economy with CRRA preferences and full depreciation

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  • Queirós, Francisco

Abstract

This paper studies the discrete-time version of the Ramsey model with CRRA preferences, a Cobb–Douglas production function and full depreciation. I show that, when the intertemporal elasticity of substitution (IES) is above one, the substitution effect of an interest rate increase always dominates the income effect; when the IES is below one, the income effect dominates.

Suggested Citation

  • Queirós, Francisco, 2025. "The savings rate in a discrete-time Ramsey economy with CRRA preferences and full depreciation," Economics Letters, Elsevier, vol. 253(C).
    • Handle: RePEc:eee:ecolet:v:253:y:2025:i:c:s0165176525002216
    DOI: 10.1016/j.econlet.2025.112384
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    More about this item

    Keywords

    Ramsey model; CRRA utility; Savings rate; Income and substitution effects;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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