Oscillations in Economic Growth and Renewable Resources with Exogenous Shocks

Abstract

This paper demonstrates business cycles in a dynamic economic model with physical CapitaLand renewable resources. The model is a synthesis of the neoclassical growth theory and the traditional dynamic models of renewable resources with household behaviour described by an alternative utility function. The model is for a perfectly competitive economy with endogenous wealth physical accumulation, resource change, and division of labour. We simulate the model to demonstrate oscillations with different exogenous shocks. First, we identify the existence of equilibrium points and motion of the dynamic system. Our comparative dynamic analysis shows how the economic system reacts to different periodic changes in the population, the preference and technology.

Keywords: renewable resource, oscillations, wealth accumulation, economic growth,

Australian Academy of Business and Economics Review, vol 1, issue 2, October 2015, pp 164-176