On the impact of shock persistence on the dynamics of a recursive economy

Jean Pierre Danthine, John B. Donaldson, Rajnish Mehra

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)147-166
Number of pages20
JournalEuropean Economic Review
Volume22
Issue number2
DOIs
StatePublished - Jul 1983
Externally publishedYes

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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