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Thresholds and Context Dependence in Growth

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  • Atish R. Ghosh
  • Holger Wolf

Abstract

Is there a single recipe for fast growth? Much of the recent cross-section empirical growth literature implicitly assumes there is. Yet both development and growth theory as well as casual empiricism suggest pervasive non-linearities in the growth process. Low inflation may grease the wheels of commerce' while high inflation may arrest them, secondary education may be crucial for promoting growth in open economies, but be largely ineffective in war-ravaged countries, etc. Such threshold effects and context dependence are difficult to capture in standard multivariate regressions, but are readily identified by classification tree analysis, undertaken here. Our results suggest that both types of non-linearities are indeed pervasive. The findings go some way towards explaining the limited robustness of cross-country growth regressions, and argue against the existence of a universal growth recipe.

Suggested Citation

  • Atish R. Ghosh & Holger Wolf, 1998. "Thresholds and Context Dependence in Growth," NBER Working Papers 6480, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:6480
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    6. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
    7. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    8. Ross Levine, 1990. "Stock markets, growth, and policy," International Finance Discussion Papers 374, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Klump, Rainer, 2003. "Inflation, factor substitution and growth," Working Paper Series 280, European Central Bank.
    2. Christine Sauer & Geng Li & Kishore Gawande, 2003. "Big push industrialization: some empirical evidence for East Asia and Eastern Europe," Economics Bulletin, AccessEcon, vol. 15(9), pages 1-7.
    3. Rupa Duttagupta & Montfort Mlachila, 2008. "What is Really Good for Long-Term Growth? Lessons from a Binary Classification Tree (BCT) Approach," IMF Working Papers 08/263, International Monetary Fund.
    4. repec:ebl:ecbull:v:15:y:2003:i:9:p:1-7 is not listed on IDEAS
    5. repec:cuf:journl:y:2013:v:14:i:3:kaminsky is not listed on IDEAS
    6. Kaminsky, Graciela L., 2006. "Currency crises: Are they all the same?," Journal of International Money and Finance, Elsevier, vol. 25(3), pages 503-527, April.
    7. Graciela L. Kaminsky, 2003. "Varieties of Currency Crises," NBER Working Papers 10193, National Bureau of Economic Research, Inc.
    8. Pritchett, Lant, 1998. "Patterns of economic growth : hills, plateaus, mountains, and plains," Policy Research Working Paper Series 1947, The World Bank.
    9. Mark Rogers, 2003. "A Survey of Economic Growth," The Economic Record, The Economic Society of Australia, vol. 79(244), pages 112-135, March.

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