Economic Growth Analysis When Balanced Growth Paths May Be Time Varying

Mountford, Andrew (2022): Economic Growth Analysis When Balanced Growth Paths May Be Time Varying.

Abstract

The determinants of an economy's growth path for income per head may vary over time. In this paper we apply unobserved components analysis to an otherwise standard panel model of economic growth dynamics so that an economy's long run relative income per head can change at any point of time. We apply this model to data for US states for 1929-2021 and the world economy for 1970-2019. In both datasets an economy's initial relative income per head is a good predictor of its long run relative income per head. Relatively poor economies on average remain relatively poor.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bayesian Econometrics, Economic Growth, State Space Models, Macroeconomics
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C11 - Bayesian Analysis: General; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence

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