Growth Models
In this post, we formulate and solve a relatively simple economic growth model where we want to find an optimal savings rate. Consumers can either use their income for direct consumption or they can save. Savings lead to investment and to more income down the road. The resulting NLP (nonlinear programming) model is not too complicated, and it is interesting to see how we can implement this model using different tools.
I often get the question: why not use Python or R for my (economic) models? This little note tries to give an answer using a smallish model. Although the model is small and simple, it actually illustrates some of the problems we can face when using Python or R code .
The model is often called a Ramsey growth model, after Frank Plumpton Ramsey [1].
