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Saddle-node bifurcations in an optimal growth model with preferences for wealth habit

Author

Listed:
  • Sağlam Çağri

    (Department of Economics, Bilkent University, Turkey)

  • Turan Agah

    (Department of Economics, Bilkent University, Turkey)

  • Turan Hamide

    (Department of Economics, Bilkent University, Turkey)

Abstract

This paper studies the dynamic implications of preferences for wealth habit in a one-sector optimal growth model. We show that the dynamics may encounter saddle-node bifurcations with respect to the parameters of the preferences: the relative weight of wealth in utility and the degree of wealth habit. We analytically provide the monotone comparative statics and the continuity of the critical capital stock with respect to the discount factor, the relative weight of wealth in utility and the degree of wealth habit.

Suggested Citation

  • Sağlam Çağri & Turan Agah & Turan Hamide, 2014. "Saddle-node bifurcations in an optimal growth model with preferences for wealth habit," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 18(2), pages 145-156, April.
    • Handle: RePEc:bpj:sndecm:v:18:y:2014:i:2:p:12:n:1
    DOI: 10.1515/snde-2012-0050
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    References listed on IDEAS

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    Cited by:

    1. Yetkiner, Hakan & Nazlioglu, Saban, 2018. "Is there an optimal level of housing wealth in the long-run? Theory and evidence," Research in International Business and Finance, Elsevier, vol. 46(C), pages 257-267.

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    More about this item

    Keywords

    Wealth habit; Threshold dynamics; Saddle-node bifurcation;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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