Below you will be asked to model this event within the augmented Solow model that we covered
Question:
Below you will be asked to model this event within the augmented Solow model that we covered in the module. You are not allowed to model the event through an increase in , , or , because positive shifts in these parameters were already covered in the tutorials. Using an increase in , , or , will result in 0 points and in failing the assessment. This will impact your choice of events.
Hint: This leaves you with a set of choices for the shock or shift, including: negative shocks to , , or ; positive or negative shocks to , , , , .
Describe what happened during the event in a few sentences and give historical context.
Pick one of the endogenous variables from the Augmented Solow model and present historical data on this variable for the time period of the event. Remember the endogenous variables of the Solow model are: capital stock, output (GDP), consumption, investment, and the wage rate.1 The first four of these variables can equally be expressed in 'per capita' terms, but it is up to you whether you present the absolute value (e.g. real GDP) or the per capital value (e.g. real GDP per capita).
The easiest approach is to download data for the variable of your choice from the web, plug it into Excel, draw a graph and then copy and paste it into your Word document as a picture. See this google doc for a list of economic data providers for many countries over time. You can also use the access to Maddison Data on the Excel simulation file for the augmented Solow model on moodle. To access it, on the EqPath sheet click on 'Show Data' and then on the newly appeared 'Compare' sheet. If you cannot obtain data that you can paste into Excel, it's OK to present a table with descriptive statistics. Describe your graph or data in a few sentences, clearly identifying the time period (e.g. the year) when the event happened. Reference the data source clearly.
Example: World War II involved a large destruction of the capital stock in Germany, so you could present data on the capital stock or GDP in Germany between 1930 and some year in the future, e.g. 1990 or 2020. You would then identify 1945 as the year when the destruction of the capital stock happened. You are not allowed to use this specific event.