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A Golden Formula in Neoclassical-Growth Models with Brownian-Motion Shocks

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  • Darong Dai

Abstract

type="main" xml:id="sjpe12042-abs-0001"> In the paper, a Golden Formula, which does not depend on the specification of production and preference functions, is established to reveal that time-average of the growth rate of optimal capital accumulation will converge to a constant, which is endogenously determined by relevant parameters, almost surely. The Golden Formula naturally implies surprisingly interesting and also intrinsic economic relations between some important macroeconomic variables; for example, it serves as a direct bridge between the modified Golden Rule and the modified Ramsey Rule. Furthermore, it indeed subsumes and hence substantially extends the classical Golden Rule in deterministic theory.

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  • Darong Dai, 2014. "A Golden Formula in Neoclassical-Growth Models with Brownian-Motion Shocks," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(2), pages 211-228, May.
    • Handle: RePEc:bla:scotjp:v:61:y:2014:i:2:p:211-228
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    Cited by:

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    3. Dai, Darong & Tian, Guoqiang, 2021. "Toward longer investment: Is an inclusive regime always better than an authoritarian one?," Economic Modelling, Elsevier, vol. 98(C), pages 41-68.

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