Extension of Pontryagin Maximum Principle and Its Economical Applications

Volume 5, Issue 4, pp 313 - 319 http://dx.doi.org/10.22436/jmcs.05.04.09

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Authors

Alireza Fakharzadeh - Department of Mathematics, Faculty of basic Sciences, Shiraz University of Technology, Shiraz, Iran. Somayeh Sharif - Department of Mathematics, Faculty of basic Sciences, Shiraz University of Technology, Shiraz, Iran. Karim Eslamloueyan - Department of Economics, Shiraz University, Shiraz, Iran.

Abstract

First, an extension of Pontryagin Maximum Principle in Infinite-Horizon, which was presented by Aseev and Kryazhimiskii, is explained. Since this method is applicable in optimal economical growth problems, for the first time several problems such as consumption and investment are solved. Moreover, for implementing Aseev and Kryazhimiskii 's method on Iranian economy, Luis Serven model is introduced. Then it is calibrated on Iranian economy during the years 1385-1415. By applying the described method, the optimal consumption and investment for maximizing the social welfare are demonstrated. Also the sensitivity analysis is discussed.

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Keywords

• Economical Growth Models
• Optimal Control
• The Pontryagin Maximum Principle
• Infinite Horizon

MSC

•  91B62

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