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How great are the great ratios?

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  • David Harvey
  • Stephen Leybourne
  • Paul Newbold
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    Abstract

    The balanced growth and neoclassical stochastic growth literatures imply stationarity of certain macroeconomic 'great ratios'. Four such ratios are considered: consumption:output, investment:output, the real interest rate and real money supply growth, and evidence for ratio stationarity in the G7 countries is examined. Univariate unit root and stationarity tests are performed, and analysis of the cointegrating relations between output, consumption and investment is conducted. Almost no evidence of stationarity is found for the consumption:output and investment:output great ratios. Empirical evidence supports real money supply growth stationarity, but is more mixed for the real interest rate.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/0003684022000015865
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 35 (2003)
    Issue (Month): 2 ()
    Pages: 163-177

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    Handle: RePEc:taf:applec:v:35:y:2003:i:2:p:163-177

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    References

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    8. Klaus NEUSSER, 1990. "Testing the Long-Run Implications of the Neoclassical Growth Model," Vienna Economics Papers vie9002, University of Vienna, Department of Economics.
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    Cited by:
    1. Menyah, Kojo & Wolde-Rufael, Yemane, 2010. "Energy consumption, pollutant emissions and economic growth in South Africa," Energy Economics, Elsevier, vol. 32(6), pages 1374-1382, November.
    2. Claude Lopez & Javier Reyes, 2005. "Real Interest Rate Stationarity and Per Capita Consumption Growth Rate," University of Cincinnati, Economics Working Papers Series 2005-02, University of Cincinnati, Department of Economics, revised Feb 2007.
    3. M.S.Rafiq, 2006. "Business Cycle Moderation - Good Policies or Good Luck: Evidence and Explanations for the Euro Area," Discussion Paper Series 2006_21, Department of Economics, Loughborough University.
    4. Holmes, Mark J. & Shen, Xin, 2013. "A note on the average propensity to consume, wealth and threshold adjustment," Economic Modelling, Elsevier, vol. 35(C), pages 309-313.
    5. Niels Kemper & Dierk Herzer & Luca Zamparelli, 2011. "Balanced growth and structural breaks: evidence for Germany," Empirical Economics, Springer, vol. 40(2), pages 409-424, April.
    6. Romero-Ávila, Diego, 2009. "Are OECD consumption-income ratios stationary after all?," Economic Modelling, Elsevier, vol. 26(1), pages 107-117, January.
    7. Attfield, Cliff & Temple, Jonathan R.W., 2010. "Balanced growth and the great ratios: New evidence for the US and UK," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 937-956, December.
    8. Hong Li & Vince Daly, 2009. "Testing the balanced growth hypothesis: evidence from China," Empirical Economics, Springer, vol. 37(1), pages 185-200, September.
    9. Camarero, Mariam & Picazo-Tadeo, Andrés J. & Tamarit, Cecilio, 2008. "Is the environmental performance of industrialized countries converging? A 'SURE' approach to testing for convergence," Ecological Economics, Elsevier, vol. 66(4), pages 653-661, July.
    10. M.S.Rafiq, 2006. "Great Ratios, Balanced Growth and Stochastic Trends: Evidence for the Euro Area," Discussion Paper Series 2006_20, Department of Economics, Loughborough University.

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