PC 2-SOLUCIONARIO

TÓPICOS EN MACROECONOMÍA
Prof.: Dr. Ricardo Quineche
T.A.: Estefany Chumbes

Instrucciones
Fecha: 18 de setiembre de 2023.
Hora de entrega: 9:20 a.m.
Modalidad de entrega: Virtual en canvas.

1 Neoclassical Growth Model with trending hours - 100 puntos

Asuma la siguiente función de utilidad y de producción, respectivamente:

C 1−σ − 1 γε 1+ε
u(C, H) = − H ε
1−σ 1+ε

Yt = Ktα (Zt Ht )1−α

, en donde:

• Xt es inversión.
• Yt es el producto.
• Ct es consumo.
• Zt es productividad tal que Zt = (1 + gz )t .
• Ht es labor.
• Kt es capital stock y K0 está dado.
• Entonces, la inversión está dada por:
Xt = Kt+1 − (1 − δ)Kt

1.1 15 puntos
Derive el sistema de ecuaciones relevante para el BGP en versión de detrended variables.
We can write the intratemporal condition in terms of the detrended variables

α
kt (1 + g)t


σ
1ε
1−α
ct (1 + g)t γ ht (1 + gh )t = (1 − α) (1 + gz )t
ht (1 + gh )t
  α   α t
1  1 t
 kt 1+g
⇔ cσt γhtε (1 + g)σ (1 + gh ) ε = (1 − α) (1 + gz )1−α
ht 1 + gh
  α t
1  1−α 1+g
cσ γh ε kt
−α (1 + gz ) 1+gh
⇔ t t = 1

1 − α ht σ
(1 + g) (1 + gh ) ε
!t
(1 + gz )1−α (1 + g)α−σ
= 1
(1 + gh )α+ ε
The feasibility condition can be written as

α
1−α
ct (1 + g)t = kt (1 + g)t (1 + gz )t (1 + gh )t ht + (1 − δ)kt (1 + g)t − kt+1 (1 + g)t+1
α−1 1−α α 1−α
⇔ ct = (1 + g)t (1 + gz )t (1 + gh )t



kt ht + (1 − δ)kt − kt+1 (1 + g)
 1−α t!
(1 + gz ) (1 + gh )
= ktα h1−α
t + (1 − δ)kt − kt+1 (1 + g)
1+g

Rewrite above as
 1−α !t
ct + kt+1 (1 + g) − (1 − δ)kt (1 + gz ) (1 + gh )
=
ktα h1−α
t 1+g
We can rewrite the Euler equation in terms of detrended variables:
"  1−α #
t
−σ t+1
−σ (1 + gz )t+1 (1 + gh )t+1 ht+1
ct (1 + g) = β ct+1 (1 + g) α + (1 − δ)
(1 + g)t+1 kt+1
"  1−α  −(1−α) #
−σ −σ −σ (1 + gz )t+1 (1 + gh )t+1 kt+1
⇔ ct = βct+1 (1 + g) α + (1 − δ) .
(1 + g)t+1 ht+1

1.2 55 puntos
Supongamos ε = 1. Calibraremos los parámetros del modelo para que coincidan con los siguientes hechos:

• La tasa de crecimiento de la producción a largo plazo (per cápita) es de 2 por ciento anual.
• La tasa de crecimiento a largo plazo de las horas trabajadas (per cápita) es -0,5 por ciento anual.
• La relación capital-producción anual es 3,2.
• La relación inversión-producción es 0,26.
• La participación del trabajo en el ingreso es 0,4.
• El individuo promedio trabaja 1000 horas por año t = 0.

1.2.1 5 puntos
¿Cuáles son los parámetros a calibrar en el modelo?
We need the value of the following parameters for the model:

σ, β, δ, α, γ, g, gh , gz , ε

1.2.2 45 puntos
Halle los valores de los siguiente parámetros: gz , σ, δ β, γ. (Para obtener el puntaje completo la respuesta se debe
escribir en orden, mostrando todos los pasos del procedimiento).
We are given that

ε = 1,
g = 0.02,
gh = −0.005,
K
= 3.2,
Y
X
= 0.26,
Y
wt H t
From firms problem: wt = (1 − α)Ktα Zt1−α Ht−α Thus, = 1 − α = 0.4,
Yt
H0 = 1, 000

2
• Labour augmenting technological progress (gz ):
– From the intratemporal condition on BGP:
1  −α !t
cσ γh ε k (1 + gz )1−α (1 + g)α−σ
= 1
1−α h (1 + gh )α+ ε

Notice that the left-hand side does not depend on t (and the left-hand side cannot be zero), so it must
be that: 1
(1 + gz )1−α (1 + g)α−σ = (1 + gh )α+ ε (1)
– From the feasibility condition on BGP:
 1−α !t
c + k(1 + g) − (1 − δ)k (1 + gz ) (1 + gh )
=
kα h1−α 1+g

On the balanced growth path, the left-hand side is constant over time (and, again, the left-hand side
cannot be zero), so it must be that
 1−α
(1 + gz ) (1 + gh )
= 1 ⇔ (1 + gz ) (1 + gh ) = 1 + g (2)
1+g

– From 2:
1+g 1 + 0.02
gz = −1= = 0.0251256.
1 + gh 1 − 0.005
• Elasticity of intertemporal substitution (σ)
– Using 2 we can rewrite 1 as
1
(1 + gz )1−α ((1 + gz ) (1 + gh ))α−σ = (1 + gh )α+ ε
1
⇔ (1 + gz )1−α+α−σ = (1 + gh )α+ ε −α+σ
1 (3)
⇔ (1 + gz )1−σ = (1 + gh ) ε +σ
1−σ
1
⇔ gh = (1 + gz ) ε +σ − 1.

Substituting the expression for gh back into , we can obtain g:

1−σ
1
g = (1 + gz ) (1 + gz ) ε +σ − 1
1+ 1
ε
1 +σ (4)
= (1 + gz ) ε −1
1+ε
= (1 + gz ) 1+εσ − 1.

– We know g and gz , so we can use (4) to obtain σ :

1+ε
g = (1 + gz ) 1+εσ − 1
1+ε
1 + g = (1 + gz ) 1+εσ
1+ε
ln (1 + g) = ln (1 + gz )
1 + εσ
2
ln (1 + g) = ln (1 + gz )
1+σ
ln (1 + gz ) ln(1 + 0.0251256)
σ=2 −1=2 − 1 = 1.50625.
ln(1 + g) ln(1 + 0.02)
• Depreciation rate (δ):

3
 – To obtain the depreciation rate, recall the law of motion for capital (i.e., investment). Dividing through
by Kt gives
Xt Kt+1 Kt
= − (1 − δ)
Kt Kt Kt
Xt
= (1 + g) − (1 − δ)
Kt
Notice:
X
Y X 0.26
K
= = = 0.08125
Y
K 3.2
Thus,
(1 − δ) = (1 + 0.02) − 0.08125
δ = 0.06125
• Discount factor (β):
– The Euler equation on the balanced path is given by
 −(1−α) !
σ k
(1 + g) = β α + (1 − δ)
h

Notice that  −(1−α) Yt

k kα h1−α y (1+g)t Yt
= = = Kt
= .
h k k (1+g)t
Kt
Thus
(1 + g)σ (1 + 0.02)1.50625
β= = = 0.914785
K −1 1−0.4
+ (1 − 0.06125)


α Y
+ (1 − δ) 3.2

• Disutility of labour (γ)

– Suppose that at t = 0, we are on the balanced growth path. Then, H0 = 1000 means that
h = 1000
t
since Ht = ht (1 + gh ) .
– We can obtain γ from the intratemporal condition on the balanced growth path:
 α
1 k
γ = σ (1 − α)
c h h
where,
1 1
! ! 1 1
(1−α) (1−α) (1−α) (1−α)
Ktα Kt
   
k Kt Kt (1−α) Kt 1−α
= = = =
h (Ht Zt )(1−α) KTα (Ht Zt )(1−α) Ktα (Ht Zt )(1−α) Yt

– From the feasibility condition on the balanced growth path:

c = kα h1−α + (1 − δ)k − k(1 + g)
  k
y
= − (δ + g) h
k h
 −1 !  1
K K 1−α
= − (δ + g) h.
Y Y

– Then,
"  −1 !  1 #−σ   α
K K 1−α 1 K 1−α
γ= − (δ + g) h (1 − α)
Y Y h Y
  −1.50625
1 1 1 1−0.4
= + 0.06125 + 0.02 (3.2) 0.4 · 1000 0.4(3.2) 0.4
3.2 1000
= 7.88281 × 10−9 .

4
 • The calibrated values are as follows:
σ = 1.50625, α = 0.6,
δ = 0.06125, g = 0.02,
−9
γ = 7.88281 × 10 , gh = −0.005,
ε = 1, gz = 0.0251256.
β = 0.914785,

1.2.3 5 puntos
¿Qué significa hallar el BGP del modelo calibrado?

It means to find the values for k∗ , h∗ and c∗ (so Kt = k∗ (1 + g)t , Ct = c∗ (1 + g)t , and Ht = h∗ (1 + gh )t ) along
a balanced growth path using the calibrated values for the parameters and the system of 3 equations a.k.a key
conditions.

1.3 30 puntos
En las siguientes lı́neas de una definición precisa de un equilibrio competitivo que descentraliza el problema del
planificador social cuando el Household es el dueño del capital y cuando la firma es dueña del capital.

• In the following lines we will give a precise definition of a competitive equilibrium which decentralises the
planner’s problem.
• The competitive equilibrium should have:
1. a representative price-taking household,
2. a representative price-taking firm
3. and some market clearing conditions.
• The household as the owner of capital:
– Let pt represent the price of consumption good in period t, wt the wage rate in period t and vt the rental
price of capital in period t, where wt and vt are in terms of time- t consumption good.
– A competitive equilibrium is a sequence of allocations {Ct , Ht , Lt , Kt+1 , kt+1 }∞ t=0 , a sequence of prices
{wt , vt , pt }∞
t=0 and an initial condition K0 such that:
1. given prices {wt , vt , pt }∞ ∞
t=0 , the allocation {Ct , Ht , Kt+1 }t=0 maximises the representative agent’s
1
utility subject to the budget constraint :
∞
X
max β t u (Ct , Ht )
{Ct ,Kt+1 ,Ht }∞
t=0 t=0
∞
X ∞
X
s.t. pt (Ct + Kt+1 ) = pt (wt Ht + (1 + vt − δ) Kt )
t=0 t=0

2. given prices {wt , vt }∞

t=0 , the representative firm maximises profits

max ktα (Zt Lt )1−α − wt Lt − vt kt , ∀t ≥ 0

kt ,Lt

3. markets clear:
Lt = Ht , ∀t ≥ 0
kt = Kt , ∀t ≥ 0
Ktα (Zt Ht ) 1−α
= Kt+1 − (1 − δ)Kt + Ct , ∀t ≥ 0.
• The firm as the owner of capital:
– Suppose instead that firms own the capital and that household own the firms.
1 (1 + vt − δ) = rt

5
– Then, a competitive equilibrium is a sequence of allocations {Ct , Ht , Lt , Kt+1 }∞ t=0 , a sequence of prices
{wt , pt }∞
t=0 and an initial condition K0 such that:
1. given prices {wt , pt }∞ ∞
t=0 , the allocation {Ct , Ht }t=0 maximises the representative agent’s utility sub-
ject to the budget constraint:
∞
X
max∞ β t u (Ct , Ht )
{Ct ,Ht }t=0
t=0
∞
X ∞
X
s.t. pt Ct = π + pt wt Ht
t=0 t=0

2. given prices {wt , pt }∞ ∞

t=0 , the allocation {Kt+1 , Lt }t=0 representative firm maximises profits

X∞
pt Ktα (Zt Lt )1−α − wt Lt − (Kt+1 − Kt (1 − δ)) .


π= max ∞
{Kt+1 ,Lt }t=0 t=0

3. markets clear:
Lt = Ht , ∀t ≥ 0,
Ktα (Zt Ht ) 1−α
= Kt+1 − (1 − δ)Kt + Ct , ∀t ≥ 0.