Is The Output-Capital Ratio Constant In The Very Long Run?
A key prediction of standard models of economic growth is that the output-capital ratio is constant along the economy's balanced growth path. Using data for 16 OECD countries over 135 years we examine whether the output-capital ratio reverts to a constant in the long run using univariate and panel stationarity tests with structural breaks. Univariate unit root tests with one and two breaks in the mean suggest that, in most circumstances, the output-capital ratio fails to revert towards a mean. However, when we allow for up to five breaks in the mean we find that for 15 of the 16 countries, the output-capital ratio is stationary and that the output-capital ratio is also panel stationary.
|Date of creation:||01 May 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.buseco.monash.edu.au/eco/
More information through EDIRC
|Order Information:|| Web: http://www.buseco.monash.edu.au/eco/research/papers/ Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andrew B. Abel & Olivier J. Blanchard, 1982.
"An Intertemporal Model of Saving and Investment,"
NBER Working Papers
0885, National Bureau of Economic Research, Inc.
- Jakob B Madsen & E Philip Davis, 2003.
"Equity Prices, Productivity Growth, And ‘The New Economy’,"
Public Policy Discussion Papers
03-04, Economics and Finance Section, School of Social Sciences, Brunel University.
- Jakob B Madsen & E Philip Davis, 2006. "Equity Prices, Productivity Growth and 'The New Economy'," Economic Journal, Royal Economic Society, vol. 116(513), pages 791-811, 07.
- Jakob B. Madsen & E. Philip Davis, 2004. "Equity Prices, Productivity Growth and 'The New Economy," FRU Working Papers 2004/11, University of Copenhagen. Department of Economics. Finance Research Unit.
- Jakob B. Madsen & E. Philip Davis, 2004. "Equity Prices, Productivity Growth, and the 'New Economy'," EPRU Working Paper Series 04-05, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- Jakob B Madsen & E Philip Davis, 2003. "Equity Prices, Productivity Growth, And ‘The New Economy’," Economics and Finance Discussion Papers 03-04, Economics and Finance Section, School of Social Sciences, Brunel University.
- Perron, P, 1988.
"The Great Crash, The Oil Price Shock And The Unit Root Hypothesis,"
338, Princeton, Department of Economics - Econometric Research Program.
- Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
- Gregory, A.W. & Hansen, B.E., 1992.
"Residual-Based Tests for Cointegration in Models with Regime Shifts,"
RCER Working Papers
335, University of Rochester - Center for Economic Research (RCER).
- Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
- Allan w. Gregory & Bruce E. Hansen, 1992. "residual-Based Tests for Cointegration in Models with Regime Shifts," Working Papers 862, Queen's University, Department of Economics.
- Pasaran, M.H. & Im, K.S. & Shin, Y., 1995.
"Testing for Unit Roots in Heterogeneous Panels,"
Cambridge Working Papers in Economics
9526, Faculty of Economics, University of Cambridge.
- 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.
- Clemente, Jesus & Montanes, Antonio & Reyes, Marcelo, 1998. "Testing for a unit root in variables with a double change in the mean," Economics Letters, Elsevier, vol. 59(2), pages 175-182, May.
- Perron, Pierre & Vogelsang, Timothy J, 1992.
"Nonstationarity and Level Shifts with an Application to Purchasing Power Parity,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 10(3), pages 301-20, July.
- Vogelsang, T.I. & Perron, P., 1991. "Nonstationary and Level Shifts With An Application To Purchasing Power Parity," Papers 359, Princeton, Department of Economics - Econometric Research Program.
- Josep Lluis Carrion Silvestre & Tomas del Barrio Castro & Enrique Lopez Bazo, 2003.
"Breaking the panels. An application to the GDP per capita,"
Working Papers in Economics
97, Universitat de Barcelona. Espai de Recerca en Economia.
- Josep Llu�s Carrion-i-Silvestre & Tom�s del Barrio-Castro & Enrique L�pez-Bazo, 2005. "Breaking the panels: An application to the GDP per capita," Econometrics Journal, Royal Economic Society, vol. 8(2), pages 159-175, 07.
- D'Adda, Carlo & Scorcu, Antonello E., 2003.
"On the time stability of the output-capital ratio,"
Elsevier, vol. 20(6), pages 1175-1189, December.
When requesting a correction, please mention this item's handle: RePEc:mos:moswps:2008-10. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simon Angus)
If references are entirely missing, you can add them using this form.