We present an alternative to the geometric Brownian motion in order to model random shocks in economics, by focusing on the stochastic logistic process, which is a natural generalization of the geometric Brownian motion. We describe some potential applications in the context of economic growth, and show that its degree of tractability is very similar to that of the geometric Brownian motion, and thus its use can effectively improve the limits (related to the presence of a constant drift) of the geometric Brownian motion to model uncertainty.

A note on stochastic logistic shocks and economic growth / D. La Torre, D. Liuzzi, S. Marsiglio (INTERNATIONAL CONFERENCE ON MODELING, SIMULATION AND APPLIED OPTIMIZATION). - In: ICMSAO 2019[s.l] : Institute of Electrical and Electronics Engineers Inc., 2019. - ISBN 978-1-5386-7684-4. - pp. 1-5 (( Intervento presentato al 8. convegno International Conference on Modeling Simulation and Applied Optimization : April, 15th - 17th tenutosi a Manama (Bahrein) nel 2019 [10.1109/ICMSAO.2019.8880319].

A note on stochastic logistic shocks and economic growth

D. La Torre;D. Liuzzi;S. Marsiglio
2019

Abstract

We present an alternative to the geometric Brownian motion in order to model random shocks in economics, by focusing on the stochastic logistic process, which is a natural generalization of the geometric Brownian motion. We describe some potential applications in the context of economic growth, and show that its degree of tractability is very similar to that of the geometric Brownian motion, and thus its use can effectively improve the limits (related to the presence of a constant drift) of the geometric Brownian motion to model uncertainty.
Economic Growth; Ramsey model; Solow Model; Stochastic Logistic Process
Settore SECS-S/06 - Metodi mat. dell'economia e Scienze Attuariali e Finanziarie
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2434/892850
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