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Adding Feedbacks and Non-Linearity to the Neoclassical Growth Model: A New Realm for System Dynamics Applications

Faculty and Informatics and Management, University of Hradec Králové, Rokitanského 62, 500 03 Hradec Králové, Czech Republic
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Received: 17 January 2018 / Revised: 20 March 2018 / Accepted: 22 March 2018 / Published: 29 March 2018
(This article belongs to the Special Issue Modelling of Economic Systems)
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Abstract

Modelling of economic systems is traditionally associated with a mathematical formalism that has its drawbacks and limitations. This study applies system dynamics as a specific modelling technique that enables us to modify and elaborate existing economic models and improve them both from a theoretical perspective and for practical applications. More specifically, the Solow-Swan growth model is enriched by feedback and non-linearity based on its extension by the energy sector. The influence and role of renewable resources are considered in this enhancement. The developed model is tested in two different scenarios and utilizes sensitivity analysis as the primary tool. Acquired outcomes offer a new perspective on the economy–energy nexus based on real data and demonstrate that system dynamics can be successfully used as a modelling tool even in the theoretical economics as a traditional discipline. View Full-Text
Keywords: environment-economy systems; neoclassical growth model; system dynamics; sensitivity analysis; energy sector; renewable resources environment-economy systems; neoclassical growth model; system dynamics; sensitivity analysis; energy sector; renewable resources
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Režný, L.; Bureš, V. Adding Feedbacks and Non-Linearity to the Neoclassical Growth Model: A New Realm for System Dynamics Applications. Systems 2018, 6, 8.

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