Indeterminacy in a log–linearized neoclassical growth model with quasi-geometric discounting
نویسندگان
چکیده
This paper studies the properties of solutions to a log–linearized version of the neoclassical growth model with quasi-geometric discounting. We show that after the log–linearization, the model has indeterminacy and multiplicity of equilibria even though the original non-linear model has a unique interior solution. Specifically, in both the deterministic and stochastic cases, the log–linearized model has a continuum of steady states. In the deterministic case, there is a unique log–linear policy function leading to each steady state, while in the stochastic case, there is a continuum of log–linear policy functions, associated with each steady state. We show that the constructed log–linear solutions cannot be ranked across the entire state space. D 2006 Elsevier B.V. All rights reserved. JEL classification: C73; D90; E21
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