Policy function calculation from value function iterations

We redo the same thing as yesterday’s by setting different functions with depreciation.

That is, we consider

where and

where u(x)=ln(x) as .

We set

and

that is CRRA utility function in general.

We use the same index vector ind as yesterday’s.

The index vector is a kind of correspondence index vector.

Starting from ind[i] for any i between 1 and n,

x<-ind[i]

The next one is

x<-ind[x]

We repeat this up until they do not change at all. We keep x’s and get a path of k’s

to the steady state. All we have to do is change the functional settings.　

We use the same way and the same procedure as yesterday’s.

Behavior of capital to steady state level

Behavior of consumption to steady state level

Change of k versus the level of k