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On the Probability Distribution of Economic Growth

Author

Listed:
  • Öller, L-E
  • Stockhammar, P

Abstract

Normality is often mechanically and without sufficient reason assumed in econometric models. In this paper three important and significantly heteroscedastic GDP series are studied. Heteroscedasticity is removed and the distributions of the filtered series are then compared to a Normal, a Normal-Mixture and Normal-Asymmetric Laplace (NAL) distributions. NAL represents a reduced and empirical form of the Aghion and Howitt (1992) model for economic growth, based on Schumpeter's idea of creative destruction. Statistical properties of the NAL distributions are provided and it is shown that NAL competes well with the alternatives.

Suggested Citation

  • Öller, L-E & Stockhammar, P, 2009. "On the Probability Distribution of Economic Growth," MPRA Paper 18581, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:18581
    as

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    File URL: https://mpra.ub.uni-muenchen.de/18581/1/MPRA_paper_18581.pdf
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    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    3. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 43-61.
    4. Helpman, Elhanan & Trajtenberg, Manuel, 1994. "A Time to Sow and a Time to Reap: Growth Based on General Purpose Technologies," CEPR Discussion Papers 1080, C.E.P.R. Discussion Papers.
    5. Maliar, Lilia & Maliar, Serguei, 2004. "Endogenous Growth And Endogenous Business Cycles," Macroeconomic Dynamics, Cambridge University Press, vol. 8(05), pages 559-581, November.
    6. Hyndman, Rob J. & Koehler, Anne B., 2006. "Another look at measures of forecast accuracy," International Journal of Forecasting, Elsevier, vol. 22(4), pages 679-688.
    7. William McGill, 1962. "Random fluctuations of response rate," Psychometrika, Springer;The Psychometric Society, vol. 27(1), pages 3-17, March.
    8. Linden, Mikael, 2001. "A Model for Stock Return Distribution," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(2), pages 159-169, April.
    9. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-1091, December.
    10. Makridakis, Spyros, 1993. "Accuracy measures: theoretical and practical concerns," International Journal of Forecasting, Elsevier, vol. 9(4), pages 527-529, December.
    11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    More about this item

    Keywords

    The Aghion-Howitt model; asymmetric innovations; mixed normal- asymmetric Laplace distribution; Kernel density estimation; Method of Moments estimation.;

    JEL classification:

    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions

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