Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5056168 | Economic Modelling | 2006 | 14 Pages |
Abstract
This paper studies the properties of solutions to a log-linearized version of the neoclassical growth model with quasi-geometric discounting. We show that after the log-linearization, the model has indeterminacy and multiplicity of equilibria even though the original non-linear model has a unique interior solution. Specifically, in both the deterministic and stochastic cases, the log-linearized model has a continuum of steady states. In the deterministic case, there is a unique log-linear policy function leading to each steady state, while in the stochastic case, there is a continuum of log-linear policy functions, associated with each steady state. We show that the constructed log-linear solutions cannot be ranked across the entire state space.
Keywords
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Authors
Lilia Maliar, Serguei Maliar,