Abstract
One of the key differences between exogenous and endogenous growth models is that a transitory shock to investment share exhibits different long-run effects on per-capita output. Exploring this difference, the present paper evaluates the empirical relevance of the two growth models for the G-7 countries. The underlying shocks are identified by an application of a dynamic factor model. Results show that a transitory shock to investment share permanently increases per-capita output in four countries, offering support to the endogenous growth model. This shock also contributes considerably to accounting for the long-run variability of per-capita output. Overall, the endogenous model is found to be empirically more plausible than previous time series studies suggest.
Original language | English |
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Pages (from-to) | 262-272 |
Number of pages | 11 |
Journal | Economic Modelling |
Volume | 32 |
Issue number | 1 |
DOIs | |
Publication status | Published - 2013 May |
Bibliographical note
Funding Information:The authors thank two anonymous referees for constructive comments. Financial support from the LG Yonam Foundation is gratefully acknowledged.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics