Is There a Golden Rule for the Stochastic Solow Growth Model ?
This paper analyzes the dependence of average consumption on the saving rate in a one-sector neoclassical Solow growth model with pro-duction shocks and stochastic rates of population growth and depreciation where arbitrary ergodic processes are considered. We show that the long-run behavior of the stochastic capital intensity, and hence average consumption along any sample-path, is uniquely determined by a random fixed point which depends continuously on the saving rate. This result enables us to prove the existence of a golden rule saving rate which maximizes average consumption per capita. We also show that the golden rule path is dynamically efficient. The results are illustrated numerically for Cobbï¿½Douglas and CES production function.
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