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Dynamics of economic growth: Uncertainty treatment using differential inclusions

Raczynski, Stanislaw
MethodsX 2019 v.6 pp. 615-632
economic development, models, risk analysis, uncertainty
The article is focused on applications of the differential inclusions to the models of economic growth, rather than the model building. The models are taken from the known literature, and some modifications are introduced to reflect an additional inertia. The aim is to treat the uncertainty in the model parameters by using differential inclusions instead of the stochastic approach. The reachable sets for the models are shown, to assess the possible ranges of the outcome with given parameters uncertainty. The approach may be interpreted as a generalization to the system dynamics methodology, providing attainable sets instead of single model trajectory and simple sensitivity analysis. A comparison with Powersim risk analysis is provided. The models of Solow and Swan, Mankiw, Bhattacharya, Romer and Weil are used. A brief review of the models is given, and several examples of simple simulations, differential inclusion applications and optimization are presented.