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This paper introduces a method of optimization in infinite-horizon economies based on the theory of correspondences. The proposed approach allow us to study time-separable and non-time-separable dynamic economic models without resorting to fixed point theorems or transversality conditions. When our technique is applied to the standard time-separable model it provides an alternative and straightforward way to derive the common recursive formulation of these models by means of Bellman equations.


This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Macroeconomic Dynamics, volume 13 (2009), following peer review. The definitive publisher-authenticated version is available online at DOI: 10.1017/S1365100509080134

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Cambridge University Press



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