I have a supersimple model I’d like to use to show that due to risk aversion consumption’s simulated mean is lower than the deterministic steady state. I can’t get this result so I would like to know what I am missing…
I post the mod file. It’s really supersimple 3 variables and 3 equations.
modello.mod (401 Bytes)
Because you use the special case of the neoclassical growth model with full depreciation and log utility. If you look at the available analytical solution, you will see that stochastics do not play a role. Hence, the effect you are looking for is not there. Use a higher risk aversion.
Thank you. So removing full depreciation should do, doesn’t it? Log utility should be fine I guess…
Yes, less than full depreciation should do.