Time Series Tests of Endogenous Growth Models
According to endogenous growth theory, permanent changes in certain policy variables have permanent effects on the rate of economic growth. Empirically, however, U.S. growth rates exhibit no large persistent changes. Therefore, the determinants of long-run growth highlighted by a specific growth model must similarly exhibit no large persistent changes or the persistent movement in these variables must be offsetting. Otherwise, the growth model is inconsistent with time series evidence. This paper argues that many AK-style models and R&D-based models of endogenous growth are rejected by this criterion. The rejection of the R&D-based models is particularly strong. Copyright 1995, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 110 (1995)
Issue (Month): 2 (May)
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