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The Relationship Between Growth and Investment

Author

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  • B Bhaskara Rao

    (University of the South Pacific)

Abstract

This paper utilizes the growth accounting framework to derive and analyze the relationship between the rate of growth of output and the ratio of investment to output. With plausible parametric assumptions this framework is used to examine the recent controversy in Fiji on investment and growth. Our results support the concerns of some USP economists that a 5% growth rate for Fiji needs significantly higher investment rates and institutional reforms.

Suggested Citation

  • B Bhaskara Rao, 2005. "The Relationship Between Growth and Investment," Macroeconomics 0511014, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0511014 Note: Type of Document - pdf; pages: 15
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    File URL: http://econwpa.repec.org/eps/mac/papers/0511/0511014.pdf
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    References listed on IDEAS

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    1. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
    2. Orazio P. Attanasio & Guglielmo Weber, 1993. "Consumption Growth, the Interest Rate and Aggregation," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 631-649.
    3. Masasaki Fuse, 2004. "Estimating intertemporal substitution in Japan," Applied Economics Letters, Taylor & Francis Journals, vol. 11(4), pages 267-269.
    4. John Y. Campbell & N. Gregory Mankiw, 1989. "Consumption, Income and Interest Rates: Reinterpreting the Time Series Evidence," NBER Chapters,in: NBER Macroeconomics Annual 1989, Volume 4, pages 185-246 National Bureau of Economic Research, Inc.
    5. Tamim Bayoumi & Ronald Macdonald, 1995. "Consumption, Income, and International Capital Market Integration," IMF Staff Papers, Palgrave Macmillan, vol. 42(3), pages 552-576, September.
    6. repec:fth:harver:1435 is not listed on IDEAS
    7. Hansen, Lars Peter & Singleton, Kenneth J, 1996. "Efficient Estimation of Linear Asset-Pricing Models with Moving Average Errors," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(1), pages 53-68, January.
    8. Masao Ogaki & Carmen M. Reinhart, 1998. "Measuring Intertemporal Substitution: The Role of Durable Goods," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 1078-1098, October.
    9. Flavin, Marjorie A, 1981. "The Adjustment of Consumption to Changing Expectations about Future Income," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 974-1009, October.
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    More about this item

    Keywords

    Investment ratio; Growth targets; Growth accounting; Total Factor Productivity.;

    JEL classification:

    • E - Macroeconomics and Monetary Economics

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