Growth and Investment Econ 4350
Exercises for Seminar 6, Friday Mars 16
Exercises:
1) With point of departure in the Ramsey-Cass-Koopman's growth model, discuss the following
statements:
a) "There will be instantaneous convergence between countries with access to international
credit!"
b) "Growth is higher when consumers are more patient!"
c) "Devoting a larger share of national output to investment would help restore rapid productivity
growth and rising living standards!"
2) Show that the steady state level of capital per "effective worker" is lower in the Ramsey-CassKoopman's
model than what the golden-rule prescribes.
3) With point of departure in a Cobb-Douglas production function construct a simulation model of
the Ramsey-Cass-Koopman's model, and experiment with different developments paths. Use
either Exel or Mathlab. Is it difficult to find the stable arm? How does saving and consumption
develop along the stable arm?
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