Regime switching optimal growth model with risk sensitive preferences

We consider a risk-sensitive optimization of consumption-utility on an infinite time horizon where the one-period investment gain depends underlying economic state whose evolution over is assumed to be described by discrete-time, finite-state, Markov chain. suppose that production function also sequence independent and identically distributed (i.i.d.) random shocks. For sake generality, utility functions are allowed unbounded from above. Under regime-switching model, it shown value problem satisfies optimality equation has unique solution in particular class functions. Furthermore, we show optimal policy exists stationary policies. derive Euler consumption. existence joint distribution growth process regime examined. Finally, present numerical considering power some hypothetical values parameters switching extension Cobb–Douglas rate function.