IDEAS home Printed from
   My bibliography  Save this article

Time Preference and Cyclical Endogenous Growth in an AK Growth Model


  • Orlando Gomes

    (Escola Superior de Comunicação Social, IPL; UNIDE/ISCTE – ERC)


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 finding endogenous business cycles in the circumstance in which the representative agent overlooks one essential requirement for optimality. On a second stage, the model is extended to include the role of leisure and, in this case, endogenous fluctuations are compatible with full rationality.

Suggested Citation

  • Orlando Gomes, 2008. "Time Preference and Cyclical Endogenous Growth in an AK Growth Model," Notas Económicas, Faculty of Economics, University of Coimbra, issue 28, pages 32-55, December.
  • Handle: RePEc:gmf:journl:y:2008:i:28:p:32-55

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Gary S. Becker & Casey B. Mulligan, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 729-758.
    2. Christiano, Lawrence J. & G. Harrison, Sharon, 1999. "Chaos, sunspots and automatic stabilizers," Journal of Monetary Economics, Elsevier, vol. 44(1), pages 3-31, August.
    3. Boldrin, Michele & Nishimura, Kazuo & Shigoka, Tadashi & Yano, Makoto, 2001. "Chaotic Equilibrium Dynamics in Endogenous Growth Models," Journal of Economic Theory, Elsevier, vol. 96(1-2), pages 97-132, January.
    4. Jean-Pierre Drugeon, 1998. "A model with endogenously determined cycles, discounting and growth," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 12(2), pages 349-369.
    5. Balasko Yves & Ghiglino Christian, 1995. "On the Existence of Endogenous Cycles," Journal of Economic Theory, Elsevier, vol. 67(2), pages 566-577, December.
    6. Caballe, Jordi & Jarque, Xavier & Michetti, Elisabetta, 2006. "Chaotic dynamics in credit constrained emerging economies," Journal of Economic Dynamics and Control, Elsevier, vol. 30(8), pages 1261-1275, August.
    7. Meng, Qinglai, 2006. "Impatience and equilibrium indeterminacy," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2671-2692, December.
    8. Medio,Alfredo & Lines,Marji, 2001. "Nonlinear Dynamics," Cambridge Books, Cambridge University Press, number 9780521558747, March.
    9. Samwick, Andrew A., 1998. "Discount rate heterogeneity and social security reform," Journal of Development Economics, Elsevier, vol. 57(1), pages 117-146, October.
    10. Cellarier, Laurent, 2006. "Constant gain learning and business cycles," Journal of Macroeconomics, Elsevier, vol. 28(1), pages 51-85, March.
    11. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
    12. Guo, Jang-Ting & Lansing, Kevin J., 2002. "Fiscal Policy, Increasing Returns, And Endogenous Fluctuations," Macroeconomic Dynamics, Cambridge University Press, vol. 6(05), pages 633-664, November.
    13. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
    14. 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, vol. 38(1), pages 205-224, February.
    15. Medio,Alfredo & Lines,Marji, 2001. "Nonlinear Dynamics," Cambridge Books, Cambridge University Press, number 9780521551861, March.
    16. Nishimura, Kazuo & Sorger, Gerhard & Yano, Makoto, 1994. "Ergodic Chaos in Optimal Growth Models with Low Discount Rates," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(5), pages 705-717, August.
    17. Nishimura, Kazuo & Yano, Makoto, 1995. "Nonlinear Dynamics and Chaos in Optimal Growth: An Example," Econometrica, Econometric Society, vol. 63(4), pages 981-1001, July.
    18. Drugeon, Jean-Pierre, 1996. "Impatience and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 20(1-3), pages 281-313.
    19. Epstein, Larry G., 1987. "A simple dynamic general equilibrium model," Journal of Economic Theory, Elsevier, vol. 41(1), pages 68-95, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gmf:journl:y:2008:i:28:p:32-55. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ana Seiça). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.