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We have just averaged over two trillion cross-country growth regressions

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Abstract

We investigate the issue of model uncertainty in cross-country growth regressions using Bayesian model averaging (BMA). We find that the posterior probability is distributed among many models, suggesting the superiority of BMA over any single model. Out-of-sample predictive results support that claim. In contrast with Levine and Renelt (1992), our results broadly support the more "optimistic'' conclusion of Sala-i-Martin (1997b), namely, that some variables are important regressors for explaining cross-country growth patterns. However, the variables we identify as most useful for growth regression differ substantially from Sala-i-Martin's results.

Suggested Citation

  • Eduardo Ley & Mark F J Steel, 1999. "We have just averaged over two trillion cross-country growth regressions," Edinburgh School of Economics Discussion Paper Series 43, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:43
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    File URL: http://www.econ.ed.ac.uk/papers/id43_esedps.pdf
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    Citations

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    Cited by:

    1. Stéphane Straub, 2000. "Factores determinantes empíricos de las buenas instituciones: ¿sabemos algo a ciencia cierta?," Research Department Publications 4216, Inter-American Development Bank, Research Department.
    2. Straub, Stéphane, 2000. "Empirical Determinants of Good Institutions: Do We Know Anything?," IDB Publications (Working Papers) 6085, Inter-American Development Bank.
    3. Fabrizio Carmignani, 2001. "Theory and Evidence on the Political Economy of Growth," Working Papers 33, University of Milano-Bicocca, Department of Economics, revised Jan 2001.
    4. Christie Smith, 2004. "The long-run effects of monetary policy on output growth," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 67, September.
    5. Fabrizio Carmignani, 2003. "Political Instability, Uncertainty and Economics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(1), pages 1-54, February.
    6. Gregory N. Price, 2003. "Economic Growth in a Cross‐section of Nonindustrial Countries: Does Colonial Heritage Matter for Africa?," Review of Development Economics, Wiley Blackwell, vol. 7(3), pages 478-495, August.

    More about this item

    Keywords

    Bayesian model averaging; choice of regressors; economic growth; Markov chain; Monte Carlo prediction;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other

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