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Macroeconomic Theory$
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Jean-Pascal Benassy

Print publication date: 2011

Print ISBN-13: 9780195387711

Published to Oxford Scholarship Online: April 2015

DOI: 10.1093/acprof:osobl/9780195387711.001.0001

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The Ramsey Model

The Ramsey Model

Chapter:
(p.145) 7 The Ramsey Model
Source:
Macroeconomic Theory
Author(s):

Jean-Pascal Bénassy

Publisher:
Oxford University Press
DOI:10.1093/acprof:osobl/9780195387711.003.0007

This chapter introduces the most famous model of growth, the Ramsey model. The rate growth in the Ramsey model is principally determined by the evolution of technology, which is assumed to be exogenous. The chapter illustrates a state of intertemporal market equilibrium, and evaluates the efficiency properties of the market equilibrium. Also, it examines an important property of the Ramsey model, that of Ricardian equivalence. It reveals how the introduction of government spending alters the dynamics of the model. Further, it presents a state of unambiguous exogenous technical progress, and demonstrates how the basic model is adapted to incorporate such technical progress. The chapter then discusses the Ramsey model in discrete time.

Keywords:   Ramsey model, market equilibrium, Ricardian equivalence, technical progress, discrete time

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