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Acyclicity and Stability of Intertemporal Optimization Models

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  • Boldrin, Michele
  • Montrucchio, Luigi

Abstract

This paper provides a turnpike-like theorem for multidimensional, optimal-growth models, which holds for evey level of the discount factor. It is shown that when the short-run return fu nction of the reduced-form model satisfies a certain sufficient condi tion, then the resulting dynamics is of a simple type, i.e., it must converge to some steady state. The result is obtained in two steps: f irst it is shown that dynamical systems satisfying an acyclic binary relation must be simple; second, the value function for the optimal p roblem is used to define a binary relation on the space of feasible s tates. The necessary and sufficient conditions under which the latter binary relation is acyclic are provided, and their relation to the t echnology and preferences is outlined. Copyright 1988 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Boldrin, Michele & Montrucchio, Luigi, 1988. "Acyclicity and Stability of Intertemporal Optimization Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 137-146, February.
    • Handle: RePEc:ier:iecrev:v:29:y:1988:i:1:p:137-46
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    Cited by:

    1. Boldrin Michele & Montrucchio Luigi, 1995. "Acyclicity and Dynamic Stability: Generalizations and Applications," Journal of Economic Theory, Elsevier, vol. 65(2), pages 303-326, April.

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