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Productivity Growth Recovery Mechanisms: An ARDL Approach Lessons from the United States, Japan and South Korea

Author

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  • Michael Koczyrkewycz
  • Taha Chaiechi
  • Rabiul Beg

Abstract

Productivity growth is an essential ingredient for achieving long-term economic growth and sustainable development. In the absence of such growth, economic growth is not achievable. Accordingly, this paper examines economic resilience through multiple productivity channels within the United States, Japan and South Korea. Adopting a Kaleckian post-Keynesian approach, productivity growth is constructed as a function of investment, capacity utilisation, indicators of financial development, and an indicator of fiscal policy. Utilising annual historical data from 1980-2019, this paper adopts Autoregressive Distributed Lag (ARDL) models, Vector Autoregressive-based Impulse Response Functions (IRF) and Variance Decompositions (VD) to examine the resilience of productivity growth through the speeds of adjustment after an external shock. Results show that long and short-run unidirectional causality between productivity growth and the explanatory variables exists amongst all economies through the error-correction terms (ECT) and ARDL models. When imposing a simulated one-time S.D. shock upon the explanatory variables, differing speeds of adjustment and recovery processes in the long-run are present. As such, the strength of causal relationships amongst productivity growth and the explanatory variables ultimately affects speeds of adjustment and hence recovery.

Suggested Citation

  • Michael Koczyrkewycz & Taha Chaiechi & Rabiul Beg, 2021. "Productivity Growth Recovery Mechanisms: An ARDL Approach Lessons from the United States, Japan and South Korea," Bulletin of Applied Economics, Risk Market Journals, vol. 8(2), pages 163-184.
  • Handle: RePEc:rmk:rmkbae:v:8:y:2021:i:2:p:163-184
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    More about this item

    Keywords

    Economic Resilience; Productivity Growth; Kaleckian post-Keynesian; Autoregressive Distributed Lag (ARDL); Impulse Response Functions (IRF); Variance Decomposition (VD).;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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