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Model uncertainty in cross-country growth regressions

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Author Info

  • Carmen Fernandez

    (School of Mathematics and Statistics, University of Saint Andrews, UK)

  • Eduardo Ley

    (IMF Institute, International Monetary Fund, Washington, DC, USA)

  • Mark F. J. Steel

    (Institute of Mathematics and Statistics, University of Kent at Canterbury, UK)

Abstract

We investigate the issue of model uncertainty in cross-country growth regressions using Bayesian Model Averaging (BMA). We find that the posterior probability is spread widely among many models, suggesting the superiority of BMA over choosing any single model. Out-of-sample predictive results support this claim. In contrast to Levine and Renelt (1992), our results broadly support the more 'optimistic' conclusion of Sala-i-Martin (1997b), namely that some variables are important regressors for explaining cross-country growth patterns. However, care should be taken in the methodology employed. The approach proposed here is firmly grounded in statistical theory and immediately leads to posterior and predictive inference. Copyright © 2001 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 16 (2001)
Issue (Month): 5 ()
Pages: 563-576

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Handle: RePEc:jae:japmet:v:16:y:2001:i:5:p:563-576

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  1. J. Bradford De Long & Lawrence H. Summers, 1990. "Equipment Investment and Economic Growth," NBER Working Papers 3515, National Bureau of Economic Research, Inc.
  2. repec:cup:etheor:v:12:y:1996:i:3:p:409-31 is not listed on IDEAS
  3. Durlauf,S.N. & Quah,D.T., 1998. "The new empirics of economic growth," Working papers 3, Wisconsin Madison - Social Systems.
  4. Carmen Fernandez & Eduardo Ley & Mark F.J. Steel, 1998. "Benchmark Priors for Bayesian Model Averaging," Econometrics 9804001, EconWPA, revised 31 Jul 1999.
  5. Chib, Siddhartha & Greenberg, Edward, 1996. "Markov Chain Monte Carlo Simulation Methods in Econometrics," Econometric Theory, Cambridge University Press, vol. 12(03), pages 409-431, August.
  6. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 407-43, May.
  7. Xavier Sala-i-Martin, 1997. "I just ran four million regressions," Economics Working Papers 201, Department of Economics and Business, Universitat Pompeu Fabra.
  8. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
  9. William A. Brock & Steven N.Durlauf, 2000. "Growth Economics and Reality," NBER Working Papers 8041, National Bureau of Economic Research, Inc.
  10. Temple, Jonathan, 2000. "Growth Regressions and What the Textbooks Don't Tell You," Bulletin of Economic Research, Wiley Blackwell, vol. 52(3), pages 181-205, July.
  11. Smith, Michael & Kohn, Robert, 1996. "Nonparametric regression using Bayesian variable selection," Journal of Econometrics, Elsevier, vol. 75(2), pages 317-343, December.
  12. Edward E. Leamer, 1982. "Let's Take the Con Out of Econometrics," UCLA Economics Working Papers 239, UCLA Department of Economics.
  13. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
  14. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  15. Leamer, Edward E, 1985. "Sensitivity Analyses Would Help," American Economic Review, American Economic Association, vol. 75(3), pages 308-13, June.
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