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Hans-Eggert Reimers and Helmut Herwartz
''Testing Growth Ratios via Pooled Error Correction Models''
( 2002, Vol. 3 No.15 )
The balanced growth and stochastic growth theory implies stable investment-output and consumption-output ratios. Our analysis supports cointegration between investment and output (IO-model) as well as consumption and output (CO-model) for single countries. Pooling the data we find cointegration and that output is weakly exogenous in the IO-specification. Weak exogeneity of output is not confirmed for the CO-specification on the pooled level. The growth ratio restrictions, however, are rejected. A small simulation study investigates the empirical properties of the employed panel tests in finite samples. It is found that the adopted bootstrap approach to determine critical values for common test statistics outperform the corresponding approximation.
Keywords: Panel cointegration analysis Wild bootstrap Growth ratios
JEL: C2 - Single Equation Models; Single Variables: General
Manuscript Received : Jul 10 2002 Manuscript Accepted : Jul 23 2002

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