Working Paper BETA #2015-06

Download working-paper

Title : Stochastic Economic Growth and Volatile Population Dynamics: Past Imperfect and Future Tense.

Author(s) : Tapas Mishra, Claude Diebolt, Mamata Parhi

Abstract : We build an analytical model to understand dynamic interlinkage between volatility in economic growth and stochastic demographic dynamics. The time series properties of the model are exploited to offer introspective understanding of the existence of persistence of endogenous and exogenous growth dynamics within our analytical setting. Our research shows that if the economy faces high degree of interdependence between its volatility and stochastic demographic growth in the past with the possibility of slow dissipation of shocks at present, then future economic growth will experience chaotic dynamics. We investigate two possibilities: a process with persistent shocks that can slowly wither away in future, and a jump process that would characterize how economic growth would respond to the arrival of sudden change in demographic system.

Key-words : Stochastic population, Volatility in economic growth, long-memory, Past dependence, Jump process.

JEL Classification : O13, O47, C14, C22, J11, D1.