Exogenous growth model

to the solow model and the AK model of economic growth. The differences and similarities in these growth models will be critically assessed with the use of empirical evidence to explain the real world economic growth patterns. The solow model is ‘a theory that analyses growth as being driven by exogenous technological change and the accumulation of factors of production’ (burda&wyplosz 2013 p561). ‘The AK model is an endogenous growth model it explains the sustainable by exogenous technological

differences in human capital reveal as cross-country differences in TFP, but it is still hotly debated for how much human capital can account. Mankiw, Romer and Weil (1992) emphasize the importance of investment in human capital and claim that the Solow growth model augmented to involve human capital can account for most of the variation in differences in output per capita. On the other hand, several recent works provide different conclusion, for example, Manuelli and Seshadri (2005) argue that most cross

the Solow Model of economic growth, which assumes the neoclassic production function of decreasing returns to capital. Solow proposed the model while considers the rate of saving and population growth as exogenous and demonstrated that the countries reach the steady state level of income per capita. However, the classical Solow model is not able to explain cross-country variation in the standard of living. The Solow model predicts the effect of saving and population growth on economic growth qualitatively

This thesis investigates the long-run causality direction between financial markets development and economic growth in Croatia, Slovenia, Serbia and China for varying time periods using VAR models and Granger Causality methods. It also explores the interrelationships between variables using the Impulse Response Function. Financial industry consists of two main parts; debt and equity (Krugman and Obstfeld, 2009). These are also called debt and equity markets. Credit markets which are primarily consisted

Literature review Classical Theory of Economic Growth Harrod Domar Growth Model The Neoclassical growth Model Empirical literature 2.1 Theoretical Literature The long history of ideas on economic growth started from the classical economists like Adam Smith, Robert Malthus, Ricardo and Marx. For more than three decades the Neoclassical and the Endogenous Growth theories were arguing and forwarding economic reasons on trend of economic growth through investment as a general and private investment

notice vast differences in average real incomes, countries’ growth records and in standards of living over times that affect living human welfare. Many model mechanisms have been used to study the worldwide growth and income differences across countries. A fundamental model that economist have used to study these issues is the Solow growth model. This essay concentrates on the analysis of this model. Firstly, the derivation of the model will be demonstrated including the needed assumptions. Then

2.2.3 Growth Theories Under the growth theories some theories of growth and growth models will be reviewed; i) The Harrod-Domar Growth Model In economic literature, this model is called capital only model. Harrod and Domar (1948) took over from Rostow, because Rostow had some unanswered questions. The model stated that saving is a certain proportion of national income and net investment is defined as the change in capital stock (K). The model further assumes that there is some direct relationship

Growth Theories Under the growth theories some theories of growth and growth models will be reviewed; i) The Harrod-Domar Growth Model In economic literature, this model is called capital only model. Harrod and Domar (1948) took over from Rostow, because Rostow had some unanswered questions. The model stated that saving is a certain proportion of national income and net investment is defined as the change in capital stock (K). The model further assumes that there is some direct relationship between

because, according to the latest data in the World Bank, GDP annual growth averaged is bigger in Nigeria (6.3%) than in Turkey (2.9%), although Turkey has a higher GDP (see appendix D). Figure 2: Nigeria and Turkey’s GDPs (US current $) (Source: World Bank, 2015) The possible converge between Nigeria and Turkey is explained by the Solow-Swan model (1956) that is known as the exogenous growth model/neoclassical growth model, based on the theory of diminishing returns of capital (Acemoglu 2009)

It also assumes n and g are the growth rate of labor and technology andδis depreciation rate (Mankiw, Romer, and Weil, 1992, called MRW in the following of this paper). (AL) represents effective units of labor, which grows at a constant exogenous rate (n + g). L(0) and A(0) are the given initial levels of labor and technology and they present exponential growth at the rate of n and g. Assuming the saving rate (s) as a constant proportion of output invested. Defining k= K/AL, which is the capital