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Great ratios and international openness

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  • Chang, Juin-Jen
  • Lin, Chang-Ching
  • Lin, Hsieh-Yu

Abstract

The great ratios have been regularly used to calibrate the long-run properties of theoretical macroeconomic models; yet their stationarity is not supported by empirical studies unequivocally. This paper empirically tests whether the international openness governs the stationarity of the great ratios. By considering 21 OECD countries, our results show that the countries with relatively high openness are less likely to exhibit a balanced-growth-path equilibrium. By controlling for a potential endogeneity problem, the great ratios are less likely to be stationary if the economy runs a surplus trade balance.

Suggested Citation

  • Chang, Juin-Jen & Lin, Chang-Ching & Lin, Hsieh-Yu, 2016. "Great ratios and international openness," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 110-121.
    • Handle: RePEc:eee:reveco:v:41:y:2016:i:c:p:110-121
    DOI: 10.1016/j.iref.2015.09.002
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    More about this item

    Keywords

    Great ratios; International trade; Balanced-growth-path equilibrium; Structural variables;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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