Chart for Solow Model
I need to graph Solow model, though it’s not as easy task as I hoped for. I looked for excel charts in internet and there is a problem with every single one of them. I’ll try to explain my point.
per capita output function: y=ka
k at time t = k at time t-1 + investment - d * k at time t, where d is depreciation rate: k(t) = k(t-1) + i - d*(k(t-1)
i is the function of y: i = y*s where s is the savings rate and is held constant
Now about the problem - everything is intertwined and function of each other - thus I have “circular reference problem” in excel. I don’t have truly independent variable as input. In sources I found in internet, they ignore the capital equation k(t) = k(t-1) + i - d*(k(t-1), which is independently is graphed and actual capital growth given for y calculation is different.
I hope I made the point as clear as possible.
I would appreciate your help!
Study together. Pass together.
Join the world's largest online community of CFA, CAIA and FRM candidates.