Questions tagged [steady-state]
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2
votes
1answer
56 views
Overlapping Generations model: Social Planner solution
Assume we have a model of OVG where there are 2 overlapping generations, youngs and olds, the agents are two period living. The utility function is logaritmic, and the production function is Cobb-...
1
vote
2answers
72 views
What does steady state mean?
I am reading a book on business cycle models, and it keep using the word "steady state". It never defined what that actually means.
Obviously it is the idea that some key variables reach constant ...
1
vote
1answer
134 views
Solow model golden rule with my exact answer
In a perfectly competitive Solow economy with physical capital accumulation, population growth and a Cobb-Douglas production function, show that the “golden rule” steady-state would be reached if at ...
7
votes
2answers
139 views
“If $\lambda$ is greater than than 1, the system explodes.” Why does the system explode?
David Romer in his textbook Advanced Macroeconomics (Third Edition) writes regarding the speed of convergence of the Diamond model the following:
(Pg. 83)
Equation (2.60) [$k_{t+1}={1\over{(1+n)(1+...
7
votes
1answer
119 views
An Optimal Control Model: A Rediculous Result for a Steady State
I was experimenting with a seemingly simple optimal control problem that generates a system of differential equations. When I calculate the values of the steady state of the system I get some very ...
1
vote
1answer
344 views
Taylor Series Approximation around steady state in Solow
In my Advanced Macro script, the professor says take TSA1 of the following equation:
$(1+g)(1+n)k_{t+1} = sk^\alpha_{t+1} + (1-\delta)k_t$
where $g$ is technological progress, $n$ population growth, ...
1
vote
2answers
336 views
Solow model, time and steady state
Suppose we have a Solow model:
$$
Y(t)=C(t)+I(t)
$$
$$
I(t)=sY(t)
$$
$$
\dot K=I(t)-δK(t)
$$
With a given Cobb-Douglas:
$$
Y(t)=Z(t)K^aL^{1-a}
$$
$$
y(t)=Y(t)/L(t)
$$
$$
k(t)=K(t)/L(t)
$$
$$
y=...
4
votes
1answer
137 views
What conditions must we demand for the economy to be always on the saddle path?
Is it enough to assume that agents have perfect foresight, or have 'rational' expectations for the economy to always - except in few cases - be in the stable saddle path?
With rational expectations, ...
1
vote
1answer
206 views
How to determine the Steady State of this model?
Consider the system of two equations: $$y_t=\beta\mathbb{E}_t[y_{t+1}+\gamma\cdot z_{t+1}]$$ $$x_t=\rho x_{t+1}+y_t$$ $$z_t=(z_0-Z_t)e^{-at}+z_T$$
Determine the steady state.
The solution manual ...
1
vote
1answer
119 views
Evaluation around steady state for a specific DSGE Model
The following equations are taken from Ravenna, walsh: "Optimal Monetary Policy with Unemployment and Sticky Prices" (2011).
(i)$$\frac{Z_{t}}{\mu_{t}} = w_t + \frac{\kappa}{q_{t}} - (1-\rho)E_{t}(\...
5
votes
3answers
524 views
Solution Method for Infinite-Horizon Maximization Problem
Full disclosure: this problem was part of a final exam that none of our class could really solve definitively. Below the general form is a specific utility function we worked with that I'll try to ...
0
votes
1answer
484 views
Solow Growth Model. Steady State. Can someone explain please?
my lecturer is doing a rather poor job explaining what he's written down, so I'm wondering if someone would be able to explain the following graph for me?
This is a part of the Solow-Swann Growth ...
3
votes
1answer
187 views
Prove the uniqueness of steady state
I have a difference equation
$$
p_t^{1-\alpha}=\alpha\sigma \left(y-p_t-\frac{(\sigma p_{t-1}^\alpha+b)p_t^{1-\alpha}}{\alpha\sigma} \right)
$$
where $\alpha \in [0,1]$ and everything else is $&...
0
votes
2answers
2k views
Marginal Product of Capital in the Solow Model
In the classic form of the Solow Model:
$$ Y=K^\alpha (AL)^{1-\alpha } $$
Describe circumstances in which the marginal product of capital could rise over time, at least for a temporary period.
I've ...
4
votes
1answer
1k views
Solow Model, Growth rate of K/L and Y/L in steady state
I have been given the following setup:
$$ Y=K^\theta (AL)^{1-\theta }$$
Where Y = Output, K = Capital, L = Labour and A = Productivity.
$$ \frac{\dot{L}}{L} = n $$
$$ \frac{\dot{A}}{A} = g $$
The ...
9
votes
2answers
10k views
Solow Model: Steady State v Balanced Growth Path
Okay, so I'm having real problems distinguishing between the Steady State concept and the balanced growth path in this model:
$$ Y = K^\beta (AL)^{1-\beta} $$
I have been asked to derive the steady ...
3
votes
1answer
73 views
Conjecture Steady State from limit properties
The question is related to this thread. I'd like to derive a unique steady state for an optimal control problem.
Consider the following programm
\begin{align}
&V(x_0) := \max_u \int^\infty_0 e^{-\...
1
vote
0answers
109 views
Log linearization
Consider some time series data $X=\{x_t:t\in[0,\infty)\}$. Define a steady state by
\begin{align}
x\in X:x_{t+1} - x_t = 0
\end{align}
and the log deviation from steady state with
\begin{align}
\hat ...
6
votes
2answers
164 views
Multiple equilibria: which one to select?
There are two agents $i=1,2$. Consider the following programm
\begin{align}
&V_1(x_0) := \max_u \int^\infty_0 e^{-\rho t}F_1(x(t),u(t),v(t))dt\\
&V_2(x_0) := \max_v \int^\infty_0 e^{-\rho t}...
4
votes
2answers
93 views
Real Positive Eigenvalue, but Stable Dynamics
UPDATE
I was not thinking straight anymore and got totally confused after working hours on my equations. The point is, I have an unstable system, but I force it on the stable path. After realizing ...
11
votes
2answers
187 views
Optimality of Zero Capital Taxation
The Chamley-Judd result of zero optimal capital taxation says that 0 capital taxation are required in order to maximize welfare at the steady state.
The result is 30 years old. Still assuming that ...
