lecture7 - Lecture 7 Dynamics of the Cass- Koopmans-Ramsey...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon

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

View Full DocumentRight Arrow Icon

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

View Full DocumentRight Arrow Icon

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

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Lecture 7 Dynamics of the Cass- Koopmans-Ramsey Model ECON 7240 VII - 2 Equations of Motion Factor prices: Instantaneous budget constraint: Euler equation: - = )) ( ) ( ), ( ( ) ( 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- + = - = ) ( ) ( 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 ECON 7240 VII - 4 Intensive Equations of Motion Factor prices: Instantaneous budget constraint: Euler equation: - = )) ( ( ' ) ( 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 + +-- = 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....
View Full Document

This note was uploaded on 01/09/2011 for the course ECON 7230 taught by Professor Feigenbaum during the Spring '10 term at Utah Valley University.

Page1 / 21

lecture7 - Lecture 7 Dynamics of the Cass- Koopmans-Ramsey...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online