Efficient Techniques to Analyze Transitional Dynamics in Models of Economic Growth

Quantitative aspects of adjustment processes in economic growth remain frequently unsolved or are tackled with bulky or inaccurate methods like multiple shooting or log-linearization. Mulligan's (1991) method of time elimination, however, has improved the analysis of saddle path dynamics in both, efficiency and simplicity. We show the inadequacy of multiple shooting methods for the analysis of deterministic continuous time infinite horizon optimization problems. The main part of the presents arefinement of the time elimination method and the methods of reversed time and reversed slope. All approaches are built on the one idea of transforming a numerically inherent instable boundary value problem into an inherent stable initial value problem. This yields easy to handle computational methods for finding the exact time path for economies in transition. The main purpose of the paper, however, is not to present genuinely new ideas but to motivate researchers and students to examine transitional dynamics by explaning how easy all this can be done.