Econometrica: Jul 1995, Volume 63, Issue 4
Nonlinear Dynamics and Chaos in Optimal Growth: An Example
Kazuo Nishimura, Makoto YanoThis study demonstrates the possibility of ergodically chaotic optimal accumulation in the case in which future utilities are discounted arbitrarily weakly. For this purpose, we use a two-sector model with Leontief production functions and construct a condition under which the optimal transition function is unimodal and expansive. We demonstrate that the set of parameter values satisfying that condition is nonempty no matter how weakly the future utilities are discounted.
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