# Tag Info

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### "If $\lambda$ is greater than than 1, the system explodes." Why does the system explode?

Eq. (2.64) can be written as (at first order) $$k_{t+1} - k^* = \lambda (k_t - k^*) \tag{1a}$$ Define the quantity $\kappa_t$ as $$\kappa_t \stackrel{\rm def}{=} k_t - k^* \tag{2}$$ So that ...
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### "If $\lambda$ is greater than than 1, the system explodes." Why does the system explode?

A system is explosive if its coefficients are non-stationary. Stationary is an important property to have in dynamic models as it tells us that an equilibrium value is obtainable (which is important ...
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### An Optimal Control Model: A Ridiculous Result for a Steady State

One general issue I see is that you try to include uncertainty in a framework developed for a deterministic setup. What you do is to use expected income in the equation of motion for human capital. ...
• 33.9k
Accepted

### Solution Method for Infinite-Horizon Maximization Problem

Your first question (regarding constraints on the parameters) can be answered through first and second derivative analysis. In order to satisfy strictly increasing, we need $u'>0$ and to satisfy ...
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### Solow model with population growth - proof of steady state level of capital per worker

Part 1 of the solution The fundamental equation of Solow model is (neglecting the $t$ subscripts): $$\Delta k= sf(k) -(n+d),$$ where $k= K/N$, $\Delta k= k_{t+1}-k_t$ and $f(k)$ is the intensive ...
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