Re: Solow model - question

Posted by kangkan on Feb 23, 2014; 8:08am
URL: http://discussion-forum.276.s1.nabble.com/Solow-model-question-tp7584830p7584884.html

Hi Sonal,the depreciation rate is d=0.1

Accd to the solow formula at steady state s*f(k)=(n+d)*k.

In our case f(k)=rootver k and n=0

Hence it becomes s* rootover(k)=d*k
=> 0.2*rootover k=0.1*k
=>4k=k^2
=>k=4.

Now for the time t, we know that k(t+1)= I(t)-d*k(t)+k(t)
=>k(t+1)=s*y(t)-d*k(t)+k(t) where s=.2 d=0.1 y(t)= rootover(k)

since N=1 by assumption
we can replace k=K

Run it it excel as manually calculating it will take a lot of time

I ran it the equation excel..the answer comes to year 310.

Regards