{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# lecture7 - Lecture 7 Dynamics of the CassKoopmans-Ramsey...

This preview shows pages 1–8. Sign up to view the full content.

Lecture 7 Dynamics of the Cass- Koopmans-Ramsey Model

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
ECON 7240 VII - 2 Equations of Motion Factor prices: Instantaneous budget constraint: Euler equation: δ - = )) ( ) ( ), ( ( ) ( t L t A t K F t r K )) ( ) ( ), ( ( ) ( t L t A t K AF t W L = ) ( ) ( ) ( ) ( ) ( ) ( t C t K t r t L t W dt t dK - + = θ ρ - = ) ( ) ( ln t r dt t C d
ECON 7240 VII - 3 Intensive Variables Define ) ( ) ( ) ( ) ( t L t A t K t k )) ( ( ) ( ) ( )) ( ) ( ), ( ( ) ( ) ( ) ( ) ( t k f t L t A t L t A t K F t L t A t Y t y = ) ( ) ( ) ( t A t C t c

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
ECON 7240 VII - 4 Intensive Equations of Motion Factor prices: Instantaneous budget constraint: Euler equation: δ - = )) ( ( ' ) ( t k f t r [ ] )) ( ( ' ) ( )) ( ( ) ( t k f t k t k f A t W - = ) ( ) ( ) ( )) ( ( ) ( t k g n t c t k f dt t dk δ + + - - = θ θ ρ g t r dt t c d - - = ) ( ) ( ln
ECON 7240 VII - 5 Dynamics of Consumption We can rewrite the Euler equation as Let us define k * such that Since f is strictly concave, If k ( t ) < k *, c ( t ) will increase. If k ( t ) > k *, c ( t ) will decrease. . *) ( ' g k f θ δ ρ + + = θ θ δ ρ g t k f dt t c d - - - = )) ( ( ' ) ( ln

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
ECON 7240 VII - 6 c Phase Diagram k c k * 0 dt dc 0 < dt dc
ECON 7240 VII - 7 Breakeven Consumption Let us define This is a concave function that goes vertically through the origin.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 21

lecture7 - Lecture 7 Dynamics of the CassKoopmans-Ramsey...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online