ECONOMIC GROWTH IN THE SHORT RUN

 
Wed, 01/09/2019 - 10:35..
 
Department of Economics
 
Aleksandra Lukina; Postdoctoral Associate at Cornell University

Joint paper: Aleksandra Lukina (Postdoctoral Associate at Cornell University) and Lawrence Blume (Goldwin Smith Professor of Economics and Professor of Information Science at Cornell University).

Efficient paths in infinite-horizon growth models are often characterized by a price turnpike; support prices converge to a ray. (In some models this entails a consumption turnpike, in others, not.) Convergence times, when addressed at all, are described with asymptotic convergence rates. We are interested in the short run behaviour. Imagine an economy running near the turnpike. Knock it off its path. How long does it take to return to the turnpike? What happens before the economy is near the turnpike? We address these questions for economies with Leontief production, using tools developed to understand the behavior of random walks on graphs. We provide upper and lower estimates for the time required to reach a given distance from the turnpike. Also, we consider some unaccustomed examples of behavior away from the turnpike.