AK growth models: new evidence based on fractional integration and breaking trends
According to AK growth models, permanent changes in investment rates have permanent effects on a countryâ€™s rate of economic growth. Jones (Quarterly Journal of Economics, 1995, 110, 495-525) finds strong evidence against this prediction studying the time series properties of GDP growth rates and investment output ratios in fifteen OECD countries for the period 1950-1988. In this paper, we test the same hypothesis in four OECD countries using a longer span of data (1870-2002 for Canada, the UK and the US and 1885-2002 for Japan). Moreover, instead of using classic approaches, which are based on stationary I (0) or unit roots I (1) processes, we use methodologies based on fractional integration. After examining the order of integration of GDP growth rates and non-residential investment rations for these countries, we do not find much evidence against the â€œgrowth effectsâ€ prediction of AK models. In fact, we only find clear evidence against this theory for the UK case.
(This abstract was borrowed from another version of this item.)
Volume (Year): 75 (2009)
Issue (Month): 2 ()
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