@techreport{NBERt0290,
title = "The (Interesting) Dynamic Properties of the Neoclassical Growth Model with CES Production",
author = "Kent Smetters",
institution = "National Bureau of Economic Research",
type = "Working Paper",
series = "Technical Working Paper Series",
number = "290",
year = "2003",
month = "March",
URL = "http://www.nber.org/papers/t0290",
abstract = {Despite being the standard growth model for several decades, little is actually known analytically about the dynamic properties of the neoclassical Ramsey-Cass-Koopmans growth model. This paper derives analytically the properties of the endogenous saving rate when technology takes the Constant Elasticity of Substitution (CES) form. For a factor substitution elasticity between capital and labor less than unity, the saving rate decreases along the transition path after the capital stock reaches a critical value identified analytically herein. But before reaching this critical value, the saving rate might increase and so, taken as a whole, the saving rate path might manifest overshooting.' Similarly, for a factor substitution elasticity greater than unity, the saving rate increases along the transition path after the capital stock reaches a critical value. Before reaching this critical value, the saving rate might decrease and so the saving rate path might manifest undershooting.' A simulation illustrating these interesting dynamics is presented.},
}