Dynamics in the Neoclassical Growth Model

Angus Chu

Chapter 3 in Advanced Macroeconomics:An Introduction for Undergraduates, 2020, pp 17-23 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In Chapter 2, we focused on the steady state of the neoclassical growth model. In other words, we only looked at the long-run effects of changes in the level of technology. In this chapter, we use a graphical approach to demonstrate the short-run effects of technology, which is a potential source of economic fluctuations in business cycles. We also graphically demonstrate the long-run effects of technology for a comparison with its short-run effects. This analysis enables us to compare the effects of changes in the level of technology on the macroeconomy at different time horizons. In summary, we find that the short-run and long-run supply curves of capital are drastically different, which in turn have interesting implications on the macroeconomic effects of technology.

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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