Stochastic shocks in a two-sector Solow model
by Simone Marsiglio
International Journal of Mathematical Modelling and Numerical Optimisation (IJMMNO), Vol. 3, No. 4, 2012

Abstract: We study a stochastic, discrete-time, two-sector growth model à la Solow (1956) characterised by perpetual growth. Assuming that exogenous i.i.d. shocks hit the physical production sector, we show that the capital dynamics can be converted, through an appropriate log-transformation, into an iterated function system converging to an invariant distribution supported on a Cantor set.

Online publication date: Sat, 30-Aug-2014

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