The Solow Model in an Open Economy
Journal of Management and Financial Sciences, Vol. 1, No. 1, October 2008
23 Pages Posted: 15 Oct 2009 Last revised: 9 Jun 2013
Date Written: October 10, 2008
The aim of this article is to extend the traditional Solow model to a small open economy. We focus on the role of the speed of technological progress at the moment of full opening to international capital market. We are primarily interested in two fundamental issue: firstly, what advantages may a small economy gain from its opening to the international capital flow, and secondly, what is the role of savings in the open economy growth. The considerations are based on the assumption that the interest rate is formed exogenously.
Keywords: economic growth, open economy, national product, saving rate, technological progress
JEL Classification: O4, E43
Suggested Citation: Suggested Citation