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Is economic growth a random walk?

  • Maurer, Rainer
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    This paper tests the hypothesis that real per capita income growth rates are random walks against the hypothesis implied by models of endogenous growth that they are stationary. Thereby the influence of the choice of different test statistics as well as the choice of the H0 on the test results is analysed. As the results show, the overwhelming majority of countries rejects the random walk hypothesis in favour of the stationarity hypothesis, no matter what statistics and H0 is chosen. Additional tests show that growth rates of most countries significantly differ. Together with the stationarity result, this implies widespread and persistent divergence of real per capita incomes.

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    File URL: http://econstor.eu/bitstream/10419/52669/1/673098753.pdf
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    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 677.

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    Date of creation: 1995
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    Handle: RePEc:kie:kieliw:677
    Contact details of provider: Postal: Kiellinie 66, D-24105 Kiel
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    1. Kahn, James A. & Ogaki, Masao, 1992. "A consistent test for the null of stationarity against the alternative of a unit root," Economics Letters, Elsevier, vol. 39(1), pages 7-11, May.
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    4. Gundlach, Erich, 1995. "The role of human capital in economic growth: new results and alternative interpretations," Open Access Publications from Kiel Institute for the World Economy 30189, Kiel Institute for the World Economy (IfW).
    5. John Y. Campbell & N. Gregory Mankiw, 1989. "Consumption, Income and Interest Rates: Reinterpreting the Time Series Evidence," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 185-246 National Bureau of Economic Research, Inc.
    6. Easterly, William & Kremer, Michael & Pritchett, Lant & Summers, Lawrence H., 1993. "Good policy or good luck?: Country growth performance and temporary shocks," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 459-483, December.
    7. Kahn, J.A. & Ogaki, M., 1990. "A Chi-Square Test For Unit Root," RCER Working Papers 212, University of Rochester - Center for Economic Research (RCER).
    8. Sargan, John Denis & Bhargava, Alok, 1983. "Testing Residuals from Least Squares Regression for Being Generated by the Gaussian Random Walk," Econometrica, Econometric Society, vol. 51(1), pages 153-74, January.
    9. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
    10. Syrquin, M. & Chenery, H.B., 1989. "Patterns Of Development, 1950 To 1983," World Bank - Discussion Papers 41, World Bank.
    11. Schwert, G William, 1989. "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(2), pages 147-59, April.
    12. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
    13. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
    14. Summers, Robert & Heston, Alan, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950-1988," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 327-68, May.
    15. Fry, Maxwell J, 1978. "Money and Capital or Financial Deepening in Economic Development?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(4), pages 464-75, November.
    16. Christopher A. Sims & Harald Uhlig, 1988. "Understanding unit rooters: a helicopter tour," Discussion Paper / Institute for Empirical Macroeconomics 4, Federal Reserve Bank of Minneapolis.
    17. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
    18. Handa, Jagdish & Ma, Barry K., 1989. "Four tests for the random walk hypothesis : Power versus robustness," Economics Letters, Elsevier, vol. 29(2), pages 141-145.
    19. Fama, Eugene F., 1984. "Term premiums in bond returns," Journal of Financial Economics, Elsevier, vol. 13(4), pages 529-546, December.
    20. Krugman, Paul, 1981. "Trade, accumulation, and uneven development," Journal of Development Economics, Elsevier, vol. 8(2), pages 149-161, April.
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