Savings, Investment and Growth: New Approaches for Macroeconomic Modelling
We prove that profit maximization behavior and the neoclassical growth model can be consistent. Moreover, we present a new medium term Keynes-Solow macro model. The short-term Keynesian macroeconomic model shows that a rise in the savings rate will reduce output, while higher savings imply for the neoclassical growth model a rise in the long run per capita income. The Keynes-Solow model sheds new light on the role of the savings rate. The Keynes-Solow model presented links both the short run and the long run, thus suggesting a new way of consistent macroeconomic modelling and of analyzing the efficiency of fiscal and monetary policy - and the role of supply-side policy. The model also is applied to some key issues of the New Economy, whose characteristics affect the effectiveness of fiscal policy and other policy instruments. The model presented suggests that government policy should focus not only on short term effects but more on medium term aspects. The medium term effect of monetary policy is larger than in the short run. Supply-side policy will raise medium term output whenever the golden rule is fulfilled and under certain other conditions, too. Our conclusions go well beyond the monetarist debate and put the focus on the consumption function, the output elasticity of capital and the depreciation rate - as well as the role of foreign direct investment.
When requesting a correction, please mention this item's handle: RePEc:bwu:eiiwdp:disbei128. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Frank Hoffmann)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.