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

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).
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Abdoul A. Ndiaye, Mamadou A. Konte, Yao T. Kpegli. The Solow model augmented with the net capital inflows to-GDP-ratio. Economics Bulletin, Economics Bulletin, 2017, 37 (3), 11 p. ⟨halshs-02900597⟩



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