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An empirical test of exogenous versus endogenous growth models for the G-7 countries

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  • Huh, Hyeon-seung
  • Kim, David

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.

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  • Huh, Hyeon-seung & Kim, David, 2013. "An empirical test of exogenous versus endogenous growth models for the G-7 countries," Economic Modelling, Elsevier, vol. 32(C), pages 262-272.
    • Handle: RePEc:eee:ecmode:v:32:y:2013:i:c:p:262-272
    DOI: 10.1016/j.econmod.2013.02.012
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    More about this item

    Keywords

    Exogenous growth; Endogenous growth; Dynamic factor model;
    All these keywords.

    JEL classification:

    • 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
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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