Example of Solow-Swan model

Example of Solow-Swan model

The Solow-Swan model is part of the neoclassical foundation describing long term relationships between economic yield, capital, productivity, and labour. While classic attention focusses on equilibrium states, here the model is expressed in a generalized manner as NMPC-Graph which focusses on mutual dynamic economic momentums.

The illustration of the generalized Solow-Swan model (refer to figure) shows feedbacks which determine the growth of the macroeconomic quantities productivity (A), labour (L), economic yield (Y), and capital (K).

NMPC-Graph_SolowSwan_EN_redu

The model here is presented for its popularity. Today, it is considered as a very simplified. Meanwhile, there are models which better explain the dynamics of economic cycles. Those ones also can be expressed as NMPC-Graphs and be validated by support of CYNERELOâ„¢.

 

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