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On the Probability Distribution of Economic Growth

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  • Öller, L-E
  • Stockhammar, P

Abstract

Normality is often mechanically and without sufficient reason assumed in econometric models. In this paper three important and significantly heteroscedastic GDP series are studied. Heteroscedasticity is removed and the distributions of the filtered series are then compared to a Normal, a Normal-Mixture and Normal-Asymmetric Laplace (NAL) distributions. NAL represents a reduced and empirical form of the Aghion and Howitt (1992) model for economic growth, based on Schumpeter's idea of creative destruction. Statistical properties of the NAL distributions are provided and it is shown that NAL competes well with the alternatives.

Suggested Citation

  • Öller, L-E & Stockhammar, P, 2009. "On the Probability Distribution of Economic Growth," MPRA Paper 18581, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:18581
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    References listed on IDEAS

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    Cited by:

    1. Pär Stockhammar & Pär Österholm, 2016. "Effects of US policy uncertainty on Swedish GDP growth," Empirical Economics, Springer, vol. 50(2), pages 443-462, March.
    2. Mahmood Ul Hassan & Pär Stockhammar, 2016. "Fitting probability distributions to economic growth: a maximum likelihood approach," Journal of Applied Statistics, Taylor & Francis Journals, vol. 43(9), pages 1583-1603, July.
    3. Saket Saurabh & Ayush Trivedi & Nithilaksh P. Lokesh & Bhagyashree Gaikwad, 2020. "Sustaining the economy under partial lockdown: A pandemic centric approach," Papers 2005.08273, arXiv.org.

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    More about this item

    Keywords

    The Aghion-Howitt model; asymmetric innovations; mixed normal- asymmetric Laplace distribution; Kernel density estimation; Method of Moments estimation.;
    All these keywords.

    JEL classification:

    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions

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