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Growth and financial liberalization under capital collateral constraints: The striking case of the stochastic AK model with CARA preferences

Author

Listed:
  • Raouf Boucekkine

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Giorgio Fabbri

    (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne)

  • Patrick A. Pintus

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

We consider a small-open, collateral-constrained AK economy. We show that the combination of CARA preferences and uncertainty on capital inflows generates long-term growth while the deterministic counterpart does not: long-term growth is entirely driven by precautionary savings, and the asymptotic growth rate of the expected capital stock is increasing in both the risk magnitude and the Arrow–Pratt absolute risk aversion parameters.

Suggested Citation

  • Raouf Boucekkine & Giorgio Fabbri & Patrick A. Pintus, 2014. "Growth and financial liberalization under capital collateral constraints: The striking case of the stochastic AK model with CARA preferences," Post-Print hal-01463906, HAL.
    • Handle: RePEc:hal:journl:hal-01463906
    DOI: 10.1016/j.econlet.2013.12.009
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    Cited by:

    1. Raouf Boucekkine & Benteng Zou, 2014. "Stochastic stability of endogenous growth: The AK case," DEM Discussion Paper Series 14-30, Department of Economics at the University of Luxembourg.
    2. Raouf Boucekkine & Patrick Pintus & Benteng Zou, 2015. "Stochastic Stability of Endogenous Growth: Theory and Applications," AMSE Working Papers 1532, Aix-Marseille School of Economics, France.
    3. Boucekkine, Raouf & Kazuo, Nishimura & Venditti, Alain, 2017. "Introduction to international financial markets and banking systems crises," Journal of Mathematical Economics, Elsevier, vol. 68(C), pages 87-91.
    4. Boucekkine, Raouf & Pintus, Patrick A. & Zou, Benteng, 2018. "Mean growth and stochastic stability in endogenous growth models," Economics Letters, Elsevier, vol. 166(C), pages 18-24.
    5. Raouf Boucekkine & Giorgio Fabbri & Patrick A. Pintus, 2015. "Risk Sharing and Growth in Small-Open Economies," Working Papers halshs-01201872, HAL.
    6. Raouf Boucekkine & Xianhai Huang, 2016. "Globalization: Financial, Trade and Institutional Aspects with Applications to China," Pacific Economic Review, Wiley Blackwell, vol. 21(3), pages 324-329, August.
    7. Fabbri, Giorgio, 2017. "International borrowing without commitment and informational lags: Choice under uncertainty," Journal of Mathematical Economics, Elsevier, vol. 68(C), pages 103-114.
    8. Ballestra, Luca Vincenzo, 2016. "The spatial AK model and the Pontryagin maximum principle," Journal of Mathematical Economics, Elsevier, vol. 67(C), pages 87-94.
    9. Bikourne, Mariem & Akdim, Khadija & Ez-Zetouni, Adil, 2025. "Stochastic analysis of an economic growth model incorporating Itô–Lévy driven investment, optimal control and numerical simulation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 674(C).
    10. Boyan Jovanovic & Sai Ma, 2023. "Growth through learning," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 50, pages 211-234, October.
    11. Brahim Gaies & Mahmoud‐Sami Nabi, 2021. "Banking crises and economic growth in developing countries: Why privileging foreign direct investment over external debt?," Bulletin of Economic Research, Wiley Blackwell, vol. 73(4), pages 736-761, October.
    12. Motoh Tsujimura & Hidekazu Yoshioka, 2023. "A robust consumption model when the intensity of technological progress is ambiguous," Mathematics and Financial Economics, Springer, volume 17, number 2, December.

    More about this item

    Keywords

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    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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