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Stability under Learning: the Endogenous Growth Problem

  • Orlando Gomes


    (Instituto Politécnico de Lisboa - Escola Superior de Comunicação Social and UNIDE-ERC)

A local dynamic analysis, in the neighborhood of the steady-state, is developed for one and two-sector endogenous growth models. The problem differs from the conventionally assumed growth setups because one considers that expectations concerning the next period value of the control variable (consumption) are formed through adaptive learning. In such scenario, the found stability conditions reveal that convergence to the unique steady-state point is feasible if a minimum requirement regarding the quality of learning in the long run equilibrium is fulfilled. Therefore, stability of growth under learning is dependentent on the efficiency with which expectations are generated.

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Paper provided by ISCTE-IUL, Business Research Unit (BRU-IUL) in its series Working Papers Series 1 with number ercwp1708.

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Length: 29 pages
Date of creation: 15 Jun 2008
Date of revision:
Handle: RePEc:isc:iscwp1:ercwp1708
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