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Investment, growth and employment: VECM for Uruguay

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  • Lucia Ramirez

    ()
    (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)

  • Gabriela Mordecki

    ()
    (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)

Abstract

Investment is a key to analyze an economy’s growth, as its increase the economy productive capacity, either expanding the capital stock as incorporating new technology that makes the production process more efficient. In Uruguay, investment has substantially increased in recent years, both overall and sectoral. This would have occurred as a result of strong growth in the period, as well as government policies on investment promotion. Growth and investment evolution, together with employment, has undergone a long history in economic theory. In that sense, there are empirical studies that support the theory that investment precedes growth, while there are others that provide evidence to the hypothesis that growth determines investment. Through a model with vector error correction (VECM) we found a long-term relationship between GDP without primary activity, investment and urban workers of Uruguay. In this model we observe a positive relationship between GDP and the other two variables, where GDP precedes both urban workers and investment.

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File URL: http://www.iecon.ccee.edu.uy/download.php?len=es&id=413&nbre=dt-07-14.pdf&ti=application/pdf&tc=Publicaciones
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Bibliographic Info

Paper provided by Instituto de Economía - IECON in its series Documentos de Trabajo (working papers) with number 14-07.

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Length: 21 pages
Date of creation: Jun 2014
Date of revision:
Handle: RePEc:ulr:wpaper:dt-07-14

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Keywords: investment; growth; employment; cointegration;

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  1. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 12(2-3), pages 231-254.
  2. Steve Bond & Asli Leblebicioglu & Fabio Schiantarelli, 2004. "Capital Accumulation and Growth: A New Look at the Empirical Evidence," Economics Papers 2004-W08, Economics Group, Nuffield College, University of Oxford.
  3. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, Econometric Society, vol. 55(2), pages 251-76, March.
  4. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, Elsevier, vol. 52(3), pages 389-402, June.
  5. Yin-Wong Cheung & Michael P. Dooley & Vladyslav Sushko, 2012. "Investment and Growth in Rich and Poor Countries," NBER Working Papers 17788, National Bureau of Economic Research, Inc.
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