Modeling the Dynamic Macroeconomic Theories of Gebrehiwot Baykedagn
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Date
2009-06
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A.A.U
Abstract
A mathematical model is specified for the dynamic macroeconomics theories of Gebrehiowt
Baykedagn on conflict, unequal exchange, and public spending on human capital formation.
Based on the theory, through time total output increases with higher labour force participation
resulted from public spending on human capital formation, political stability and trade
equivalence and it declines with land degradation resulted from political instability ( conflict)
and unequal exchange in the international trade through time. Hence, to show how the total
output reach at the steady state, we have derived the equilibrium path of the model under three
different scenarios both graphicall y and mathematically. Based on the specified model, in the
scenario of which the rate of growth in total output due to labour force participation through time
is equal to the rate of decrease in total output due to land degradation, the economy will be at the
steady state, otherwise in the downward or upward trend of the equilibrium path. Furthermore, in
order to see how the overall economy moves, a counter factual dynamic simulation is
ex perimented and found to be consistent with the model under the scenario of a shock to public
spending on human capital formation and a shock to political stability.
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Keywords
Dynamic Macroeconomic, Gebrehiwot Baykedagn