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The Solow model augmented with the net capital inflows to-GDP-ratio

Author

Listed:
  • Abdoul A. Ndiaye

    (LARES, Université Gaston Berger de Saint-Louis)

  • Mamadou A. Konte

    (LARES, Université Gaston Berger de Saint-Louis)

  • Yao T. Kpegli

    (LARES, Université Gaston Berger de Saint-Louis)

Abstract

In this paper, we study the Solow model in open economy. For this purpose, we increase the traditional model with the net capital inflows to-GDP-ratio. We end up with two main implications. First, the steady state net marginal product of capital more correctly predicts the real interest rate than that obtained in traditional model. Second, the golden rule of the savings rate tells us that a savings rate that is below (or above) the share of capital in GDP doesn't necessarily mean that the savings rate is too low (or too high).

Suggested Citation

  • Abdoul A. Ndiaye & Mamadou A. Konte & Yao T. Kpegli, 2017. "The Solow model augmented with the net capital inflows to-GDP-ratio," Economics Bulletin, AccessEcon, vol. 37(3), pages 2020-2029.
    • Handle: RePEc:ebl:ecbull:eb-16-00782
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    Cited by:

    1. Pape Yona Boubacar Mane & Abdoulaye Diagne & Yao thibaut Kpegli, 2019. "Modeling the Macroeconomic Effects of Disease: Extension and Application in the context of Senegal," Economics Bulletin, AccessEcon, vol. 39(4), pages 2904-2912.

    More about this item

    Keywords

    Solow model; economic growth; net capital inflow to-GDP-ratio; speed of convergence; golden rule.;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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