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The choice of time as a discrete or continuous variable may radically affect the stability of equilibrium in an endogenous growth model with durable consumption. In the continuous-time model the steady state is locally saddle-path stable with monotonic convergence. However, in the discrete-time model the steady state may be unstable or saddle-path stable with monotonic or oscillatory convergence.

Discrete Versus Continuous Time in an Endogenous Growth Model with Durable Consumption