Further inspection of the stochastic growth model by an analytical approach

Abstract

It has been argued that a clear understanding of the stochastic growth model can best be achieved by working out an approximate analytical solution. This paper follows that idea but streamlines the presentation of the loglinear approximate solution for the neoclassical model of capital accumulation. By focusing on the partial elasticity of capital stock with respect to its lag term, this paper is able to confirm analytically some conclusions based on numerical calculations in previous papers, and to clarify why a simpler solution arises in several special cases.