IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/2739.html
   My bibliography  Save this paper

Modelling real GDP per capita in the USA: cointegration test

Author

Listed:
  • Kitov, Ivan
  • Kitov, Oleg
  • Dolinskaya, Svetlana

Abstract

A two-component model for the evolution of real GDP per capita in the USA is presented and tested. The first component of the GDP growth rate represents an economic trend and is inversely proportional to the attained level of real GDP per capita itself, with the nominator being constant through time. The second component is responsible for fluctuations around the economic trend and is defined as a half of the growth rate of the number of 9-year-olds. This nonlinear relationship between the growth rate of real GDP per capita and the number of 9-year-olds in the USA is tested for cointegration. For linearization of the problem, a predicted population time series is calculated using the original relationship. Both single year of age population time series, the measured and predicted one, are shown to be integrated of order 1 – the original series have unit roots and their first differences have no unit root. The Engel-Granger approach is applied to the difference of the measured and predicted time series and to the residuals or corresponding linear regression. Both tests show the existence of a cointegrating relation. The Johansen test results in the cointegrating rank 1. Since a cointegrating relation between the measured and predicted number of 9-year-olds does exist, the VAR, VECM, and linear regression are used in estimation of the goodness of fit and root mean-square errors, RMSE. The highest R2=0.95 and the best RMSE is obtained in the VAR representation. The VECM provides consistent, statistically reliable, and significant estimates of the coefficient in the cointegrating relation. Econometrically, the tests for cointegration show that the deviations of real economic growth in the USA from the economic trend, as defined by the constant annual increment of real per capita GDP, are driven by the change in the number of 9-year-olds.

Suggested Citation

  • Kitov, Ivan & Kitov, Oleg & Dolinskaya, Svetlana, 2007. "Modelling real GDP per capita in the USA: cointegration test," MPRA Paper 2739, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:2739
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/2739/1/MPRA_paper_2739.pdf
    File Function: original version
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ivan Kitov, 2005. "GDP growth rate and population," Economics Bulletin, AccessEcon, vol. 28(9), pages 1.
    2. Kitov, Ivan, 2006. "Real GDP per capita in developed countries," MPRA Paper 2738, University Library of Munich, Germany.
    3. Ivan, Kitov, 2006. "Exact prediction of inflation in the USA," MPRA Paper 2735, University Library of Munich, Germany.
    4. Carl Chiarella & Shenhuai Gao, 2002. "Type I Spurious Regression in Econometrics," Working Paper Series 114, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    5. Ivan O. Kitov, 2005. "Modelling the overall personal income distribution in the USA from 1994 to 2002," Working Papers 07, ECINEQ, Society for the Study of Economic Inequality.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ivan O. KITOV, 2008. "The Driving Force of Labor Force Participation in Developed Countries," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(3(5)_Fall), pages 203-222.
    2. Kitov, Ivan & Kitov, Oleg, 2012. "Real GDP per capita since 1870," MPRA Paper 39021, University Library of Munich, Germany.
    3. Dogru, Bülent, 2015. "Is Per Capıta Real GDP Stationary in High Income OECD Countrıes? Evidence from Panel Unıt Root Test With Multiple Structural Breaks," MPRA Paper 63856, University Library of Munich, Germany.
    4. Kitov, Ivan & Kitov, Oleg, 2010. "S&P 500 returns revisited," MPRA Paper 21733, University Library of Munich, Germany.
    5. Kitov, Ivan & Kitov, Oleg, 2007. "Exact prediction of S&P 500 returns," MPRA Paper 6056, University Library of Munich, Germany.
    6. Kitov, Ivan & Kitov, Oleg, 2009. "Modelling and predicting labor force productivity," MPRA Paper 15152, University Library of Munich, Germany.
    7. Ivan O. KITOV, 2010. "Predicting Real Economic Growth In France, Germany, New Zealand, And The United Kingdom," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 5(1(11)_Spr), pages 48-54.
    8. Kitov, Ivan, 2009. "Predicting real GDP per capita in France, Germany, New Zealand, and the UK," MPRA Paper 15503, University Library of Munich, Germany.
    9. Kitov, Ivan & Kitov, Oleg & Dolinskaya, Svetlana, 2008. "Comprehensive macro-model for the U.S. economy," MPRA Paper 9808, University Library of Munich, Germany.
    10. Guironnet Jean-Pascal, 2009. "Technological Catch-up and Scale Effect in OECD Countries: A Bipolarized Growth Convergence," Working Papers 09-05, Association Française de Cliométrie (AFC).

    More about this item

    Keywords

    GDP per capita; population estimates; cointegration; VAR; VECM; USA;

    JEL classification:

    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:2739. 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: (Joachim Winter) or (Rebekah McClure). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.