Prague Economic Papers 2024, 33(1):1-35 | DOI: 10.18267/j.pep.849
Testing the Balanced Growth Hypothesis in the Presence of Structural Breaks: Evidence from Developed and Developing Countries
- Department of Humanities and Social Sciences, Visvesvaraya National Institute of Technology, Nagpur, India
The balanced growth theory and the neoclassical growth model predict that certain macroeconomic variables such as output, consumption, and investment grow at a constant rate. Analytically, it indicates that the consumption-output ratio and the investment-output ratio (termed "great ratios") must be stationary. Moreover, consumption and investment must be cointegrated with output. This paper examines these implications with respect to developed (G7) and emerging (E7) countries using data for the period 1970-2019. The validity of the balanced growth hypothesis (BGH) is tested by using unit root tests (univariate analysis) and cointegration techniques (multivariate analysis) that permits endogenously determined structural breaks. The findings of our univariate analysis suggest limited evidence of the BGH in developed and developing countries. The multivariate analysis exhibits more supportive evidence of the BGH in five developed countries and limited evidence for two developing countries. The study also employs the Westerlund (2006) panel cointegration test with structural breaks to examine the validity of the BGH. Empirical findings validate the BGH for the G7 countries, while it is not validated for E7 countries. In sum, the study promulgates the use of structural breaks in a multivariate setup in testing the BGH to find robust evidence.
Klíčová slova: balanced growth, great ratios, structural breaks, E7 and G7 countries
JEL classification: C32, C33, E13, E23
Vloženo: 6. prosinec 2022; Revidováno: 25. srpen 2023; Přijato: 1. říjen 2023; Zveřejněno: 22. únor 2024 Zobrazit citaci
ACS | AIP | APA | ASA | Harvard | Chicago | Chicago Notes | IEEE | ISO690 | MLA | NLM | Turabian | Vancouver |
Reference
- Attfield, C. L. F., Jonathan R. W. T. 2006. Balanced Growth and the Great Ratios: New Evidence for the US and UK. 75. Economics, The University of Manchester.
- Bandyopadhyay, S. 2012. Chapter 8 Convergence Club Empirics: Evidence from Indian States. Research on Economic Inequality, 20, 175-203. https://doi.org/10.1108/S1049-2585(2012)0000020011
Přejít k původnímu zdroji...
- Brock, W. A., Leonard J. M. 1972. Optimal Economic Growth and Uncertainty: The Discounted Case. Journal of Economic Theory, 4(3), 479-513. https://doi.org/10.1016/0022-0531(72)90135-4
Přejít k původnímu zdroji...
- Calamitsis, E. A., Deppler, M., Odling-Smee, J., Chabrier, P., Loser, C. 1998. How Has the Asian Crisis Affected Other Regions? Finance & Development: A Quarterly Magazine of the IMF 35(3).
- Caldara, D., Fuentes-Albero, C., Gilchrist, F., Zakrajšek, E. 2016. The Macroeconomic Impact of Financial and Uncertainty Shocks. European Economic Review, 88, 185-207. https://doi.org/10.1016/j.euroecorev.2016.02.020
Přejít k původnímu zdroji...
- Cardoso, E., Teles, V. 2009. A Brief History of Brazil's Growth.
- Cette, G., Corde, S., Lecat, R. 2017. Stagnation of Productivity in France: A Legacy of the Crisis or a Structural Slowdown? https://doi.org/10.24187/ecostat.2017.494t.1916
Přejít k původnímu zdroji...
- Chang, J., Lin, C., Lin, H. 2016. Great Ratios and International Openness. International Review of Economics & Finance, 41, 110-121. https://doi.org/10.1016/j.iref.2015.09.002
Přejít k původnímu zdroji...
- Clemente, J., Montanes, A., Ponz, M. 1999. Are the Consumption/Output and Investment/Output Ratios Stationary? An International Analysis. Applied Economics Letters, 6(10), 687-91. https://doi.org/10.1080/135048599352510
Přejít k původnímu zdroji...
- Clemente, J., Montañés, A., Reyes, M. 1998a. Testing for a Unit Root in Variables with a Double Change in the Mean. Economics Letters, 59(2), 175-82.
Přejít k původnímu zdroji...
- Cobb, C. W., Douglas, P. 1928. A Theory of Production. The American Economic Review, 18(1), 139-165.
- Cross, P. 2010. Slowdowns during Periods of Economic Growth.
- Das, S., Ghate, C., Robertson, P. 2015. Remoteness, Urbanization, and India's Unbalanced Growth. World Development, 66, 572-87. https://doi.org/10.1016/j.worlddev.2014.09.013
Přejít k původnímu zdroji...
- Dickey, D. A., Fuller, W. 1979. Distribution of the Estimators for Autoregressive Time Series With a Unit Root. Journal of the American Statistical Association, 74(366), 427-31. https://doi.org/10.2307/2286348
Přejít k původnímu zdroji...
- Donaldson, J., Mehra, R. 1983. Stochastic Growth with Correlated Production Shocks. Journal of Economic Theory, 29(2), 282-312.
Přejít k původnímu zdroji...
- Elias, S., Noone, C. 2011. The Growth and Development of the Indonesian Economy. Reserve Bank of Australia.
- Farhani, S. 2012. Tests of Parameters Instability: Theoretical Study and Empirical Analysis on Two Types of Models (ARMA Model and Market Model). International Journal of Economics and Financial Issues, 2(3), 246-66.
- Foellmi, R. 2005. Structural Change and Balanced Growth. Pp. 31-74 in Consumption Structure and Macroeconomics: Structural Change and the Relationship Between Inequality and Growth, Lecture Notes in Economics and Mathematical Systems. Berlin, Heidelberg: Springer.
- Forbes. 2021. How Serious Are Mexico's Economic Problems?
- Ghate, C., Robertson, P. 2014. Understanding India's Unbalanced Growth.
- Ghate, C., Wright, S. 2012. The 'V-Factor': Distribution, Timing and Correlates of the Great Indian Growth Turnaround. Journal of Development Economics, 99(1), 58-67.
Přejít k původnímu zdroji...
- Giavazzi, F., Spaventa, L., Masera, R. 1989. Italy: The Real Effects of Inflation and Disinflation. Economic Policy, 4(8), 135-171. https://doi.org/10.2307/1344466
Přejít k původnímu zdroji...
- Hakkio, C. S., Rush, M. 1991. Cointegration: How Short Is the Long Run? Journal of International Money and Finance, 10(4), 571-581. https://doi.org/10.1016/0261-5606(91)90008-8
Přejít k původnímu zdroji...
- Harrod, R.F. 1939. An Essay in Dynamic Theory. Blackwell Publishing for the Royal Economic Society 49(113).
Přejít k původnímu zdroji...
- Harvey, D. I., Leybourne, S., Newbold, P. 2003. How Great Are the Great Ratios? Applied Economics, 35(2), 163-77. https://doi.org/10.1080/0003684022000015865
Přejít k původnímu zdroji...
- Hirschman, A. 1958. The Strategy of Economic Development. Yale University Press, New Haven.
- Hossain, F., Chung, P. 1999. Long-Run Implications of Neoclassical Growth Models: Empirical Evidence from Australia, New Zealand, South Korea and Taiwan. Applied Economics, 31(9), 1073-82.
Přejít k původnímu zdroji...
- Jiang, X., Caraballo-Cueto, J., Nguyen, C. 2020. Balanced versus Unbalanced Growth: Revisiting the Forgotten Debate with New Empirics. Review of Development Economics, 24(4), 1430-46. https://doi.org/10.1111/rode.12688
Přejít k původnímu zdroji...
- Johansen, S. 1988. Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamics and Control, 12(2), 231-254. https://doi.org/10.1016/0165-1889(88)90041-3
Přejít k původnímu zdroji...
- Johansen, S. 1995. Likelihood-Based Inference in Cointegrated Vector Autoregressive Models. Oxford: Oxford University Press.
Přejít k původnímu zdroji...
- Johansen, S., Juselius, K. 1990. Maximum Likelihood Estimation and Inference on Cointegration - with Applications to the Demand for Money. Oxford Bulletin of Economics and Statistics, 52(2), 169-210. https://doi.org/10.1111/j.1468-0084.1990.mp52002003.x
Přejít k původnímu zdroji...
- Johansen, S., Mosconi, R., Nielsen, B. 2000. Cointegration Analysis in the Presence of Structural Breaks in the Deterministic Trend. The Econometrics Journal 3(2), 216-49.
Přejít k původnímu zdroji...
- Kaldor, N. 1961. Capital Accumulation and Economic Growth. Pp. 177-222 in The Theory of Capital: Proceedings of a Conference held by the International Economic Association, International Economic Association Series, edited by F. A. Lutz and D. C. Hague. London: Palgrave Macmillan UK.
Přejít k původnímu zdroji...
- Kaufman, M., García-Escribano, M. 2013. Unleashing Brazil's Growth.
- Kemper, N., Herzer, D., Zamparelli, L. 2011. Balanced Growth and Structural Breaks: Evidence for Germany. Empirical Economics, 40(2), 409-424. https://doi.org/10.1007/s00181-010-0361-z
Přejít k původnímu zdroji...
- King, R. G., Plosser, C., Rebelo, S. 1988. Production, Growth and Business Cycles: I. The Basic Neoclassical Model. Journal of Monetary Economics, 21(2), 195-232. https://doi.org/10.1016/0304-3932(88)90030-X
Přejít k původnímu zdroji...
- King, R. G., Plosser, C., Stock, J., Watson, M. 1991. Stochastic Trends and Economic Fluctuations. The American Economic Review, 81(4), 819-840.
- Klein, L. R., Kosobud, R.F. 1961. Some Econometrics of Growth: Great Ratios of Economics. The Quarterly Journal of Economics, 75(2), 173-98. https://doi.org/10.2307/1884198
Přejít k původnímu zdroji...
- Koch, L., Chaudhary, M. A., Bilquees, F. 2001. February 2001 Crisis in Turkey: Causes and Consequences [with Comments]. The Pakistan Development Review, 40(4), 467-486.
Přejít k původnímu zdroji...
- Kose, M. A., Sugawara, N., Terrones, M. 2020. Global Recessions.
- Kunst, R., Neusser, K. 1990. Cointegration in a Macroeconomic System. Journal of Applied Econometrics, 5(4), 351-365. https://doi.org/10.1002/jae.3950050404
Přejít k původnímu zdroji...
- Kurihara, K. K. 1959. The Keynesian Theory of Economic Development. Recherches Économiques de Louvain/ Louvain Economic Review, 25(6), 637-637. https://doi.org/10.1017/S1373971900073200
Přejít k původnímu zdroji...
- Kuznets, S. 1942. Uses of National Income in Peace and War. Pp. 1-45 in Uses of National Income in Peace and War. NBER.
- Lahiri, K., Mamingi, N. 1995. Testing for Cointegration: Power versus Frequency of Observation - Another View. Economics Letters, 49(2), 121-124. https://doi.org/10.1016/0165-1765(95)00668-6
Přejít k původnímu zdroji...
- Li, H., Daly, V. 2009. Testing the Balanced Growth Hypothesis: Evidence from China. Empirical Economics, 37(1), 185-200. https://doi.org/10.1007/s00181-008-0229-7
Přejít k původnímu zdroji...
- Kose, A., Naotaka, S., Terrones M. E. 2020. Global Recessions. (9172).
Přejít k původnímu zdroji...
- Maddison, A. 1987. Growth and Slowdown in Advanced Capitalist Economies: Techniques of Quantitative Assessment. Journal of Economic Literature, 25(2), 649-698.
- Malpede, M. 2011. The Impact of Oil Price Fluctuations on the Italian Economy: An Econometric Analysis.
- Mayer P. F. 2019. Weak Democracies, Failed Policies, and the Demise of Ecosystems in Poor and Developing Nations. Tropical Conservation Science, 12. https://doi.org/10.1177/1940082919839902
Přejít k původnímu zdroji...
- Meckl, J. 2002. Structural Change and Generalized Balanced Growth. Journal of Economics, 77(3), 241-266.
Přejít k původnímu zdroji...
- Mills, T. C. 2001. Great Ratios and Common Cycles: Do They Exist for the UK? Bulletin of Economic Research, 53(1), 35-51. https://doi.org/10.1111/1467-8586.00116
Přejít k původnímu zdroji...
- Moreno-Brid, J., Rivas Valdivia, J., Santamaría, J. 2005. Mexico: Economic Growth Exports and Industrial Performance after NAFTA.
- Neusser, K. 1991. Testing the Long-Run Implications of the Neoclassical Growth Model. Journal of Monetary Economics, 27(1), 3-37.
Přejít k původnímu zdroji...
- Osterwald-Lenum, M. 1992. A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics. Oxford Bulletin of Economics and Statistics, 54(3), 461-472. https://doi.org/10.1111/j.1468-0084.1992.tb00013.x
Přejít k původnímu zdroji...
- Perron, P. 1990. Testing for a Unit Root in a Time Series with a Changing Mean. Journal of Business & Economic Statistics, 8(2), 153-162. https://doi.org/10.2307/1391977
Přejít k původnímu zdroji...
- Perron, P., Vogelsang, T. 1992. Nonstationarity and Level Shifts with an Application to Purchasing Power Parity. Journal of Business & Economic Statistics, 10(3), 301-320. https://doi.org/10.2307/1391544
Přejít k původnímu zdroji...
- PwC. 2017. The World in 2050 The Long View: How Will the Global Economic Order Change by 2050?
- Reimers, H. E. 1992. Comparisons of Tests for Multivariate Cointegration. Statistical Papers, 33(1), 335-359. https://doi.org/10.1007/BF02925336
Přejít k původnímu zdroji...
- Reinsel, G. C., Ahn, S. 1992. Vector Autoregressive Models with Unit Roots and Reduced Rank Structure: Estimation. Likelihood Ratio Test, and Forecasting. Journal of Time Series Analysis, 13(4), 353-375. https://doi.org/10.1111/j.1467-9892.1992.tb00113.x
Přejít k původnímu zdroji...
- Rotemberg, J., Woodford, M. 1996. Real-Business-Cycle Models and the Forecastable Movements in Output, Hours, and Consumption. The American Economic Review, 86(1), 71-89.
- Serletis, A. 1994. Testing the Long-Run Implications of the Neoclassical Growth Model for Canada. Journal of Macroeconomics, 16(2), 329-346. https://doi.org/10.1016/0164-0704(94)90075-2
Přejít k původnímu zdroji...
- Serletis, A., Krichel, T. 1995. International Evidence on the Long-Run Implications of the Neoclassical Growth Model. Applied Economics, 27(2), 205-210. https://doi.org/10.1080/00036849500000025
Přejít k původnímu zdroji...
- Shiller, R. J., Perron, P. 1985. Testing the Random Walk Hypothesis: Power versus Frequency of Observation. Economics Letters, 18(4), 381-386. https://doi.org/10.1016/0165-1765(85)90058-8
Přejít k původnímu zdroji...
- Singer, H. 1958. The Concept of Balanced Growth and Economic Development; Theory and Facts.
- Solow, R. M. 1956. A Contribution to the Theory of Economic Growth. The Quarterly Journal of Economics, 70(1), 65-94. https://doi.org/10.2307/1884513
Přejít k původnímu zdroji...
- Stock, J. H., Watson, M. 1988. Testing for Common Trends. Journal of the American Statistical Association, 83(404), 1097-1107. https://doi.org/10.1080/01621459.1988.10478707
Přejít k původnímu zdroji...
- Swan, T. W. 1956. Economic Growth and Capital Accumulation. Economic Record, 32(2), 334-361. https://doi.org/10.1111/j.1475-4932.1956.tb00434.x
Přejít k původnímu zdroji...
- Trenkler, C. 2008. Determining P-Values for Systems Cointegration Tests with a Prior Adjustment for Deterministic Terms. Computational Statistics, 23(1), 19-39. https://doi.org/10.1007/s00180-007-0066-8
Přejít k původnímu zdroji...
- Turner, P. 2010. Power Properties of the CUSUM and CUSUMSQ Tests for Parameter Instability. Applied Economics Letters, 17(11), 1049-53. https://doi.org/10.1080/00036840902817474
Přejít k původnímu zdroji...
- Vu, K. 2020. Sources of Growth in the World Economy: A Comparison of G7 and E7 Economies.
Přejít k původnímu zdroji...
- Walsh, C. 1993. What Caused the 1990-1991 Recession?
- Westerlund, J. 2006. Testing for Panel Cointegration with Multiple Structural Breaks. Oxford Bulletin of Economics and Statistics, 68(1), 101-132. https://doi.org/10.1111/j.1468-0084.2006.00154.x
Přejít k původnímu zdroji...
- World Bank. 2022. The World Bank in Indonesia.
Tento článek je publikován v režimu tzv. otevřeného přístupu k vědeckým informacím (Open Access), který je distribuován pod licencí Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), která umožňuje nekomerční distribuci, reprodukci a změny, pokud je původní dílo řádně ocitováno. Není povolena distribuce, reprodukce nebo změna, která není v souladu s podmínkami této licence.