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On the empirical content of the convergence debate: Cross‐country evidence on growth and capacity utilisation

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  • Santiago José Gahn
  • Alejandro González

Abstract

The Neo‐Kaleckian model predicts that actual capacity utilisation is endogenous to demand shocks and positively correlated with growth in the short and long run. Competing macroeconomic theories predict that such correlation does not exist in the long run and demand shocks have transitory effects on capacity utilisation. Using a quarterly unbalanced panel of 21 developed and developing countries, we show that taking into account direct survey measures, capacity utilisation is stationary, positively correlated with growth in the short run and uncorrelated with growth in the long run. These results are inconsistent with the long‐run behaviour of the Neo‐Kaleckian model.

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  • Santiago José Gahn & Alejandro González, 2022. "On the empirical content of the convergence debate: Cross‐country evidence on growth and capacity utilisation," Metroeconomica, Wiley Blackwell, vol. 73(3), pages 825-855, July.
    • Handle: RePEc:bla:metroe:v:73:y:2022:i:3:p:825-855
    DOI: 10.1111/meca.12383
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    Cited by:

    1. Santiago J. Gahn, 2022. "Towards an explanation of a declining trend in capacity utilisation in the US economy," Working Papers PKWP2214, Post Keynesian Economics Society (PKES).

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian

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