Discussion Paper

The one-sector growth model with idiosyncratic shocks

Abstract: This paper investigates the one-sector growth model where agents experience idiosyncratic endowment shocks and face a borrowing constraint. It is shown that a steady-state capital level lies strictly above the steady state in the model without shocks. In addition, the capital stock increases monotonically when it is sufficiently far below a steady state. However, near a steady state there can be interesting (nonmonotonic) economic dynamics.

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Discussion Paper / Institute for Empirical Macroeconomics

Publication Date: 1995

Number: 105