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Interdependencies Between Gross Capital Formation, Economic Growth And External Equilibrium In The Context Of The European Union Enlargement

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  • Florin-Marius PAVELESCU

    (Institute of National Economy)

Abstract

In this paper, having in view the hypothesis that the synthetic indicator of accumulation regime is the gross capital formation/GDP ratio, an improved analysis methodology of correlation between the above-mentioned indicators is proposed. The proposed methodology is applied for the 1999-2006 periods in case of 27 countries that now are belonging to European Union. It is revealed that in most of EU member states the main factor of correlation was the investment propensity growth, in conditions of external commercial balance worsening. Also, there are identified some asymmetries between the old (EU-15) and new (NMS) member countries of the European Union. In EU-15 the gross capital formation has a more reduced weight in GDP and domestic demand in comparison with NMS. Also, the foreign commercial balance register as a rule a surplus in EU-15 and deficits in NMS. On this base, it is concluded that for Romania, like the majority of new members-states, it is very important to adopt measures favouring a high growth rate of GDP at the same time with the decrease in foreign commercial deficits.

Suggested Citation

  • Florin-Marius PAVELESCU, 2008. "Interdependencies Between Gross Capital Formation, Economic Growth And External Equilibrium In The Context Of The European Union Enlargement," Romanian Journal of Economics, Institute of National Economy, vol. 27(2(36)), pages 79-94, December.
    • Handle: RePEc:ine:journl:v:2:y:2008:i:36:p:79-94
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    References listed on IDEAS

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    1. N. Gregory Mankiw & David Romer & David Weil, 1990. "A Contribution to the Empirics of Economic Growth," Working Papers 1990-24, Brown University, Department of Economics.
    2. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    3. Florin-Marius PAVELESCU, 2008. "Gross Capital Formation And Economic Growth During Early 2000’S In Eu-Member And Candidates States," Romanian Journal of Economics, Institute of National Economy, vol. 26(1(35)), pages 166-179, June.
    4. Engelbert Stockhammer, 2007. "Some Stylized Facts on the Finance-Dominated Accumulation Regime," Working Papers wp142, Political Economy Research Institute, University of Massachusetts at Amherst.
    5. Madsen, Jakob B., 2002. "The causality between investment and economic growth," Economics Letters, Elsevier, vol. 74(2), pages 157-163, January.
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    Cited by:

    1. Pavelescu, Marius Florin, 2013. "Dynamics of Fixed Capital Productivity and the Macroeconomic Equilibrium," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 145-158, June.

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    More about this item

    Keywords

    gross capital formation; main factor of the correlation between gross capital formation and GDP; investments propensity; absorbative economic growth;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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