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Endogenous Growth with Intertemporally Dependent Preferences

  • Giuseppe Ferraguto


    (Bocconi University)

  • Patrizio Pagano


    (Bank of Italy, Economic Research Department)

This paper presents an endogenous growth model with intertemporally dependent preferences and "Ak" technology. We derive sufficient conditions for a balanced growth path to be an equilibrium, provide a full characterization of the equilibrium dynamics of the economy, and explore the implications of habit formation for the patterns of cross-country growth and convergence. Finally, we show that the alternative departure from the standard assumption of isoelastic preferences represented by the use of a Stone-Geary utility function can be interpreted as a special case of the model with habit formation. Our results highlight the importance of preferences in the dynamics of growth, a point neglected in most of the literature.

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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 382.

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Date of creation: Oct 2000
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Handle: RePEc:bdi:wptemi:td_382_00
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  1. Fornari, Fabio & Monticelli, Carlo & Pericoli, Marcello & Tivegna, Massimo, 2002. "The impact of news on the exchange rate of the lira and long-term interest rates," Economic Modelling, Elsevier, vol. 19(4), pages 611-639, August.
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