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Asymptotic Growth under Uncertainty: Existence and Uniqueness

In: Economic Uncertainty, Instabilities And Asset Bubbles Selected Essays

Listed author(s):

    (Indiana University, USA)


    (Loyola University of Chicago, USA)

AbstractThis paper demonstrates, using the Reflection Principle, the existence and uniqueness of the solution to the classic Solow equation under continuous time uncertainty for the class of strictly concave production functions which are continuously differentiable on the nonnegative real numbers. This class contains all CES functions with elasticity of substitution less than unity. A steady state distribution also exists for this class of production functions which have a bounded slope at the origin. A condition on the drift-variance ratio of the stochastic differential equation alone, independent of technology and the savings ratio, is found to be necessary for the existence of a steady state.

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This chapter was published in:
  • A G Malliaris, 2005. "Economic Uncertainty, Instabilities and Asset Bubbles:Selected Essays," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 5864, November.
  • This item is provided by World Scientific Publishing Co. Pte. Ltd. in its series World Scientific Book Chapters with number 9789812701015_0001.
    Handle: RePEc:wsi:wschap:9789812701015_0001
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