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Determination of Potential Growth Using Panel Techniques

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  • Kappler, Marcus

Abstract

The aim of this paper is to construct an indicator of potential growth for developed countries using the insights of the theoretical and empirical growth literature. The Pooled Mean Group Estimator of Pesaran, Shin and Smith (1999) that employs a panel data technique is used. This estimator is suited for integrated annual macroeconomic panel data sets to estimate long-run relationships between GDP per capita and its determinants of the underlying cross-section of 12 industrial countries. Since this long-run relationship describes a sort of structural relationship, one can use the fitted model to calculate an indicator of potential growth. The first part of the paper reviews the existing growth literature with a special focus on industrial countries in order to motivate for the used variables in the econometric analysis. The next part explains the concept of panel unit roots and panel cointegration and introduces the underlying empirical approach. Next, empirical results are presented and discussed. Then, the calculation of the potential growth indicator is demonstrated. The last part of this paper concludes.

Suggested Citation

  • Kappler, Marcus, 2004. "Determination of Potential Growth Using Panel Techniques," ZEW Discussion Papers 04-69, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:2881
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    File URL: https://www.econstor.eu/bitstream/10419/24084/1/dp0469.pdf
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    Cited by:

    1. Oliver Falck, 2007. "Mayflies and long-distance runners: the effects of new business formation on industry growth," Applied Economics Letters, Taylor & Francis Journals, vol. 14(12), pages 919-922.

    More about this item

    Keywords

    Economic growth; Panel data; unit root; cointegration;

    JEL classification:

    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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