1.a. What is the engine of growth in following models? Why? Briefly explain your
answer using the formula and the intuition behind each model.
i. AK Model
ii. Lucas Model
iii. Romer’s 1986 Spillover Model

Question 2:
Answer the following questions .

a) Using the AK model of endogenous growth answer the following questions
i. How does an increase in the investment rate in this model affect economic
growth? What is the economic intuition behind this result?
ii. How valid AK model is empirically? Explain it briefly. (Hint: use the findings
of the relevant article distributed to you and covered in class).

b) Write a brief essay on which endogenous model/models can explain the real growth
patterns of the countries better and why? (Please make use of articles related to these
models).

c) Suppose that you were asked to carry out an empirical analysis of the sigma and beta
convergence across countries. Based on this task answer the followings:
a. What type of series would you collect to assess the sigma and beta
convergence?
b. What hypotheses would you write down for sigma and beta convergence?
c. Which methods would you use to test the hypotheses for sigma and beta
convergence?
d. How would you interpret your results?