Please use this identifier to cite or link to this item: https://doi.org/10.1016/j.jedc.2007.09.017
Title: Note on positive lower bound of capital in the stochastic growth model
Authors: Chatterjee, P. 
Shukayev, M.
Keywords: Stationary distributions
Stochastic dynamic programming
Stochastic growth theory
Issue Date: 2008
Source: Chatterjee, P., Shukayev, M. (2008). Note on positive lower bound of capital in the stochastic growth model. Journal of Economic Dynamics and Control 32 (7) : 2137-2147. ScholarBank@NUS Repository. https://doi.org/10.1016/j.jedc.2007.09.017
Abstract: In the context of the classical stochastic growth model, we provide a simple proof that the optimal capital sequence is strictly bounded away from zero whenever the initial capital is strictly positive. We assume that the utility function is bounded below and the shocks affecting output are bounded. However, the proof does not require an interval shock space, thus, admitting both discrete and continuous shocks. Further, we allow for finite marginal product at zero capital. Finally, we use our result to show that any optimal capital sequence converges globally to a unique invariant distribution, which is bounded away from zero. © 2007 Elsevier B.V. All rights reserved.
Source Title: Journal of Economic Dynamics and Control
URI: http://scholarbank.nus.edu.sg/handle/10635/44318
ISSN: 01651889
DOI: 10.1016/j.jedc.2007.09.017
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