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Optimal control and the Fibonacci sequence

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    We bridge mathematical number theory with that of optimal control and show that a generalised Fibonacci sequence enters the control function of finite horizon dynamic optimisation problems with one state and one control variable. In particular, we show that the recursive expression describing the first-order approximation of the control function can be written in terms of a generalised Fibonacci sequence when restricting the final state to equal the steady state of the system. Further, by deriving the solution to this sequence, we are able to write the first-order approximation of optimal control explicitly. Our procedure is illustrated in an example often referred to as the Brock-Mirman economic growth model.

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    File URL: http://www.ssb.no/a/publikasjoner/pdf/DP/dp674.pdf
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    Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 674.

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    Date of creation: Jan 2012
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    Handle: RePEc:ssb:dispap:674
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    1. Levine, Paul & Pearlman, Joseph & Pierse, Richard, 2008. "Linear-quadratic approximation, external habit and targeting rules," Journal of Economic Dynamics and Control, Elsevier, vol. 32(10), pages 3315-3349, October.
    2. Magill, Michael J. P., 1977. "A local analysis of N-sector capital accumulation under uncertainty," Journal of Economic Theory, Elsevier, vol. 15(1), pages 211-219, June.
    3. Magill, Michael J. P., 1977. "Some new results on the local stability of the process of capital accumulation," Journal of Economic Theory, Elsevier, vol. 15(1), pages 174-210, June.
    4. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, August.
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