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Stochastic Growth With Nonconvexities:The Optimal Case

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  • Kazuo Nishimura
  • Ryszard Rudnicki
  • John Stachurski

Abstract

This paper studies optimal investment and dynamic behaviour of stochastically growing economies. We assume neither convex technology nor bounded support of the productivity shocks. A number of basic results concerning the investment policy and the Ramsey–Euler equation are established. We also prove a fundamental dichotomy pertaining to optimal growth models perturbed by standard econometric shocks: Either an economy is globally stable or it is globally collapsing to the origin.

Suggested Citation

  • Kazuo Nishimura & Ryszard Rudnicki & John Stachurski, 2004. "Stochastic Growth With Nonconvexities:The Optimal Case," Department of Economics - Working Papers Series 897, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:897
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    File URL: http://www.economics.unimelb.edu.au/downloads/wpapers-04/897.pdf
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    References listed on IDEAS

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