Econ 7040 Macroeconomics Analysis Tutorial 3
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Advanced Macroeconomics (Econ 7040)
Tutorial 3: The Augmented Solow Model
1. Suppose that the augmented Solow model represents the world well enough. Assume that Yt = AKα(ZtNt)1一α .
(a) Find the new transitional dynamics equations of the model, in eciency units terms [TD2].
(Backward engineering: given that the model displays long-run equilibrium in ef- hciency units, we divide everything by ZtNt)
(b) Find an expression for the steady state value of = and k = . How do we know that * exists?
(c) Find an expression for the steady state value of yˆ = and y =
(d) Find an expression for the steady state value of = and c =
(e) Use the macrohistory data set JSTdatasetR4.dta to compute the growth rate of population in the U.S for the period 1860-2016. Plot a graph, clearly labeling the axis. Do you observe any trend or structural change in n?
(f) What are the model’s implications on y, k, and r from the observed changes in n in the U.S?
(g) Is the observed evolution of y, c and r consistent with these predictions? Discuss how the model can (or cannot) make sense of the evolution of these variables more broadly.
2023-05-22
The Augmented Solow Model