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Testing Growth Ratios via Pooled Error Correction Models

Author

Listed:
  • Hans-Eggert Reimers

    (Economics Department, Hochschule Wismar)

  • Helmut Herwartz

    (Institute of Statistics and Econometrics, Humboldt-University Berlin)

Abstract

The balanced growth and stochastic growth theory implies stable investment-output and consumption-output ratios. Our analysis supports cointegration between investment and output (IO-model) as well as consumption and output (CO-model) for single countries. Pooling the data we find cointegration and that output is weakly exogenous in the IO-specification. Weak exogeneity of output is not confirmed for the CO-specification on the pooled level. The growth ratio restrictions, however, are rejected. A small simulation study investigates the empirical properties of the employed panel tests in finite samples. It is found that the adopted bootstrap approach to determine critical values for common test statistics outperform the corresponding approximation.

Suggested Citation

  • Hans-Eggert Reimers & Helmut Herwartz, 2002. "Testing Growth Ratios via Pooled Error Correction Models," Economics Bulletin, AccessEcon, vol. 3(15), pages 1-11.
    • Handle: RePEc:ebl:ecbull:eb-02c20003
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    More about this item

    Keywords

    Panel cointegration analysis Wild bootstrap Growth ratios;

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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