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The endogeneity of the natural rate of growth

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  • Miguel A. LeÛn-Ledesma
  • A. P. Thirlwall

Abstract

The aim of this paper is to estimate the sensitivity of the natural rate of growth to the actual rate of growth for 15 OECD countries over the period 1961--95, on the hypothesis that the natural rate of growth is not exogenously given. To do this, we estimate the natural rate of growth and, then, how it changes when the actual growth rate is different from the natural rate. As a side test of the endogeneity hypothesis, we also test for the direction of causality between national output and factor inputs for the same set of countries. Our results support the idea that the natural rate of growth is not independent of the actual rate of growth and bring to the fore the importance of focusing on demand as well as supply for an understanding of long-run growthrate differences between countries. Copyright 2002, Oxford University Press.

Suggested Citation

  • Miguel A. LeÛn-Ledesma & A. P. Thirlwall, 2002. "The endogeneity of the natural rate of growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 26(4), pages 441-459, July.
    • Handle: RePEc:oup:cambje:v:26:y:2002:i:4:p:441-459
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    More about this item

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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