The Neoclassical Growth Model

Angus Chu

Chapter 2 in Advanced Macroeconomics:An Introduction for Undergraduates, 2020, pp 9-16 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In this chapter, we convert the static general-equilibrium model into a dynamic general-equilibrium model, which is the foundation of modern macroeconomics. Specifically, we consider the neoclassical growth model, in which the representative household chooses consumption and saving to maximise lifetime utility. To solve this dynamic optimisation problem, we use a mathematical tool known as the Hamiltonian. This analysis enables us to endogenise the equilibrium levels of macroeconomic variables, such as capital and output, in order to explore their determinants, such as the level of technology and the preference of the representative household.

Keywords: Macroeconomics; Dynamic General Equilibrium; Economic Growth; Endogenous Technological Change; Monetary Policy; Fiscal Policy; Business Cycles; Unemployment; Market Failure; The Neoclassical Growth Model; The Romer Model; The Schumpeterian Growth Model; The Solow Growth Model; The Ramsey Model; The New Keynesian Model (search for similar items in EconPapers)
JEL-codes: E6 E62 E66 F4 F43 O11 (search for similar items in EconPapers)
Date: 2020
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