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Investment, growth and employment: VECM for Uruguay

Author

Listed:
  • Lucia Ramirez

    () (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)

  • Gabriela Mordecki

    () (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)

Abstract

Investment is a key to analyze an economy’s growth, as its increase the economy productive capacity, either expanding the capital stock as incorporating new technology that makes the production process more efficient. In Uruguay, investment has substantially increased in recent years, both overall and sectoral. This would have occurred as a result of strong growth in the period, as well as government policies on investment promotion. Growth and investment evolution, together with employment, has undergone a long history in economic theory. In that sense, there are empirical studies that support the theory that investment precedes growth, while there are others that provide evidence to the hypothesis that growth determines investment. Through a model with vector error correction (VECM) we found a long-term relationship between GDP without primary activity, investment and urban workers of Uruguay. In this model we observe a positive relationship between GDP and the other two variables, where GDP precedes both urban workers and investment.

Suggested Citation

  • Lucia Ramirez & Gabriela Mordecki, 2014. "Investment, growth and employment: VECM for Uruguay," Documentos de Trabajo (working papers) 14-07, Instituto de Economía - IECON.
  • Handle: RePEc:ulr:wpaper:dt-07-14
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    File URL: http://www.iecon.ccee.edu.uy/download.php?len=es&id=413&nbre=dt-07-14.pdf&ti=application/pdf&tc=Publicaciones
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    References listed on IDEAS

    as
    1. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    2. Steve Bond & Asli Leblebicioglu & Fabio Schiantarelli, 2010. "Capital accumulation and growth: a new look at the empirical evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(7), pages 1073-1099, November/.
    3. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    4. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
    5. Yin-Wong Cheung & Michael P. Dooley & Vladyslav Sushko, 2012. "Investment and Growth in Rich and Poor Countries," NBER Working Papers 17788, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    investment; growth; employment; cointegration;

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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