Kitov, Ivan and Kitov, Oleg and Dolinskaya, Svetlana (2007): Modelling real GDP per capita in the USA: cointegration test.
Download (157Kb) | Preview
A two-component model for the evolution of real GDP per capita in the USA is presented and tested. The first component of the GDP growth rate represents an economic trend and is inversely proportional to the attained level of real GDP per capita itself, with the nominator being constant through time. The second component is responsible for fluctuations around the economic trend and is defined as a half of the growth rate of the number of 9-year-olds. This nonlinear relationship between the growth rate of real GDP per capita and the number of 9-year-olds in the USA is tested for cointegration. For linearization of the problem, a predicted population time series is calculated using the original relationship. Both single year of age population time series, the measured and predicted one, are shown to be integrated of order 1 – the original series have unit roots and their first differences have no unit root. The Engel-Granger approach is applied to the difference of the measured and predicted time series and to the residuals or corresponding linear regression. Both tests show the existence of a cointegrating relation. The Johansen test results in the cointegrating rank 1. Since a cointegrating relation between the measured and predicted number of 9-year-olds does exist, the VAR, VECM, and linear regression are used in estimation of the goodness of fit and root mean-square errors, RMSE. The highest R2=0.95 and the best RMSE is obtained in the VAR representation. The VECM provides consistent, statistically reliable, and significant estimates of the coefficient in the cointegrating relation. Econometrically, the tests for cointegration show that the deviations of real economic growth in the USA from the economic trend, as defined by the constant annual increment of real per capita GDP, are driven by the change in the number of 9-year-olds.
|Item Type:||MPRA Paper|
|Original Title:||Modelling real GDP per capita in the USA: cointegration test|
|Keywords:||GDP per capita; population estimates; cointegration; VAR; VECM; USA|
|Subjects:||O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O42 - Monetary Growth Models
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E37 - Forecasting and Simulation: Models and Applications
C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods; Simulation Methods
O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O51 - U.S.; Canada
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
|Depositing User:||Ivan Kitov|
|Date Deposited:||15. Apr 2007|
|Last Modified:||13. Feb 2013 11:17|
Bureau of Economic Analysis. (2007). National Income and Product Accounts. Table 1.1.6. Real Gross Domestic Product, Chained Dollars. Retrieved March 5, 2007 from http://bea.gov/be/dn/nipaweb/ Chiarella, C., & Gao, S. (2002). Type I spurious regression in econometrics. Working Paper No 114, School of Finance and Economics, University of Technology Sydney Engle, R., & Granger, C. (1987). Cointegration and error correction: representation, estimation, and testing. Journal of Econometrics, 55, 251-276 Granger, C., & Newbold, P. (1967). Spurious regression in econometrics. Journal of Econometrics, 2, 111-120 Fixler, D.J., & Green, B.T. (2005). Reliability of the NIPA Estimates of U.S. Economic Activity. Retrieved February 26, 2007 from http://www.bea.gov/scb/pdf/2005/02February/0205_ NIPAa.pdf Handbook of Economic Growth. (2005). Eds. Agnion, P. Durlauf, S., Elsevier B.V. Hendry, D., & Juselius, K. (2001). Explaining Cointegration Analysis: Part II. Energy Journal, 22, 75-120 Johansen, S. (1988). Statistical analysis of cointegrating vectors. Journal of Economic Dynamics and Control, 12, 231-254 Juselius, K., Franchi, M. (2007). Taking a DSGE Model to the Data Meaningfully. Economics Discussion Papers, No 2007-6. Retrieved March 5, 2007 from http://www.ejournal.org/economics/discussionpapers/2007-6 Kitov, I. (2005a). A model for microeconomic and macroeconomic development. Working Paper 05, ECINEQ, Society for the Study of Economic Inequality. Kitov, I. (2005b). Modeling the overall personal income distribution in the USA from 1994 to 2002. Working Paper 07, ECINEQ, Society for the Study of Economic Inequality Kitov, I. (2005c). Modeling the average income dependence on work experience in the USA from 1967 to 2002. Working Paper 11, ECINEQ, Society for the Study of Economic Inequality Kitov, I. O. (2006a), “Modeling the age-dependent personal income distribution in the USA", Working Papers 17, ECINEQ, Society for the Study of Economic Inequality. Kitov, I. (2006b). GDP growth rate and population. Working Paper 42, ECINEQ, Society for the Study of Economic Inequality. Kitov, I. (2006c). Real GDP per capita in developed countries. Available at SSRN Retrieved February 27, 2007 from: http://ssrn.com/abstract=886664 Kitov, I. (2006d). The Japanese economics. Available at SSRN. Retrieved February 27, 2007 from: http://ssrn.com/abstract=886663 Kitov, I. (2006e). Inflation, Unemployment, Labor Force Change in the USA. Working Paper 28, ECINEQ, Society for the Study of Economic Inequality. Kitov, I. (2006f). Exact prediction of inflation in the USA. Available at SSRN: http://ssrn.com/abstract=916060 Kitov, I., (2007). Inflation, Unemployment, Labor Force Change in European countries. In T. Nagakawa (Ed.), Business Fluctuations and Cycles. Hauppauge NY: Nova Science Publishers. (in press) Kitov, I., Kitov, O., & Dolinskaya, S. (2007a). Inflation as a Function of Labor Force Change Rate: Cointegration Test for the USA. Retrieved February 27, 2007 from: http://ssrn.com/abstract=956014 Kitov, I., Kitov, O., & Dolinskaya, S. (2007b). Linear Lagged Relationship Between Inflation, Unemployment and Labor Force Change Rate in France: Cointegration Test. Retrieved February 27, 2007 from: http://ssrn.com/abstract=960047 NBER. (2007). Business Cycle Expansions and Contractions. Retrieved March 5, 2007 from http://www.nber.org/cycles/cyclesmain.html#announcements U.S. Census Bureau. (2002). Technical Paper 63RV: Current Population Survey - Design and Methodology, issued March 2002. Retrieved February 26, 2007 from http://www.census.gov/prod/2002pubs/tp63rv.pdf U.S. Census Bureau. (2004). National intercensal estimates (1990-2000). Retrieved February 26, 2007 from http://www.census.gov/popest/archives/methodology/ intercensal_nat_meth.html U.S. Census Bureau. (2006). Methodology. United States Population Estimates by Age, Sex, Race, and Hispanic Origin: July 1, 2005. Retrieved February 26, 2007 from http://www.census. gov/popest/topics/methodology/2006_nat_meth.html U.S. Census Bureau. (2007). Population Estimates. Retrieved February 26, 2007 from http://www.census.gov/popest/estimates.php West, K.K., Robinson, J.G. (1999). What Do We Know About the Undercount of Children? US Census Bureau working paper 039, Issued August 1999. Retrieved March 5, 2007 from http://www.census.gov/population/www/documentation/twps0039/twps0039.html