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On Harrod’s Natural Rate of Growth and the Role of Demand: an Empirical Assessment

Author

Listed:
  • Molerés-Regalado, Estefanía.

    (Universidad Nacional Autónoma de México)

  • Perrotini-Hernández, Ignacio.

    (Universidad Nacional Autónoma de México)

Abstract

Starting from the seminal contribution of Harrod (1939), the current paper tests the hypothesis of endogeneity of the natural growth rate of output visà-vis aggregate demand fluctuations for the NAFTA economies (Canada, Mexico and the United States). Empirical results show that potential output reacts to fluctuations in actual growth rates, thus signaling that deflation may lead to stagbilisation (stagnation cum stabilisation) as depression of both effective demand and employment impart deleterious effects on the actual rate of economic growth. Under elastic conditions of the supply- side of the economy, neglect of the role played by demand does not contribute to a better understanding of the determinants of economic growth./ El presente artículo parte de la contribución original de Harrod (1939), y procede a contrastar la hipótesis de endogeneidad de la tasa natural de crecimiento del producto vis-à-vis fluctuaciones de la demanda agregada para el caso de las economías del TLCAN (Canadá, Estados Unidos y México). Los resultados empíricos muestran que el producto potencial reacciona ante fluctuaciones en la tasa de crecimiento observada, lo cual sugiere que la deflación puede inducir estancabilización (estancamiento con estabilización), dado que la depresión de la demanda efectiva y el empleo provocan efectos nocivos en la tasa de crecimiento económico observado. La omisión del papel de la demanda no contribuye a una mejor comprensión de los determinantes del crecimiento económico cuando la oferta es elástica.

Suggested Citation

  • Molerés-Regalado, Estefanía. & Perrotini-Hernández, Ignacio., 2013. "On Harrod’s Natural Rate of Growth and the Role of Demand: an Empirical Assessment," Panorama Económico, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 0(16), pages 29-49, primer se.
    • Handle: RePEc:ipn:panora:v:viii:y:2013:i:16:p:29-49
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    References listed on IDEAS

    as
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    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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