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It is well-established that the presence of deterministic and/or stochastic trends in DSGE models may imply that the agents' objective functions attain infinite values. This is the case even if the subjective discount factor is strictly less than one. Currently, sufficient conditions ensuring finiteness of the objective functions when deterministic and stochastic trends are included have not been derived. This paper derives such conditions.
Published Online: 2010-6-30
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