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How great are the great ratios?

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Author Info
David I. Harvey
Stephen J. Leybourne
Paul Newbold
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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Article provided by Taylor and Francis Journals in its journal Applied Economics.

Volume (Year): 35 (2003)
Issue (Month): 2 (January)
Pages: 163-177
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Handle: RePEc:taf:applec:v:35:y:2003:i:2:p:163-177

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Cited by:
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  1. 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. [Downloadable!]
  2. 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. [Downloadable!]
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