The present note relies exclusively on numerical computation of a parametric version of a (stochastic) version of the one-sector neoclassical growth model to derive the qualitative properties of the optimal consumption/investment policy functions and of the resultant steady state, and to study the manner in which these properties are affected by an increase in the degree of shock persistence. In particular, we measure the effects of (differing degrees of) shock persistence on the means and variances of the resulting (stationary) distributions on output, consumption, and capital stock. Furthermore, we explore the effects of increasing degrees of shock persistence on the dynamic time path of the economy.
ASJC Scopus subject areas
- Economics and Econometrics