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AK growth models: new evidence based on fractional integration and breaking trends

Published online by Cambridge University Press:  17 August 2016

J. Cunado ,
L.A. Gil-Alana  and
F. Pérez de Gracia
J. Cunado
Affiliation:
Universidad de Navarra, Faculty of Economics, Edificio Biblioteca, Entrada Este, E-S1080 Pamplona, SPAIN, Phone: 00 34 948 425 625, Fax: 00 34 948 425 626, E-mail: [email protected]
L.A. Gil-Alana
Affiliation:
Universidad de Navarra, Faculty of Economics, Edificio Biblioteca, Entrada Este, E-S1080 Pamplona, SPAIN, Phone: 00 34 948 425 625, Fax: 00 34 948 425 626, E-mail: [email protected]
F. Pérez de Gracia
Affiliation:
Universidad de Navarra, Faculty of Economics, Edificio Biblioteca, Entrada Este, E-S1080 Pamplona, SPAIN, Phone: 00 34 948 425 625, Fax: 00 34 948 425 626, E-mail: [email protected]
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Summary

According to AK growth models, permanent changes in investment rates have permanent effects on a country's rate of economic growth. Jones (Quarterly Journal of Economics, 1995, 110, 495-525) finds strong evidence against this prediction studying the time series properties of GDP growth rates and investment output ratios in fifteen OECD countries for the period 1950-1988. In this paper, we test the same hypothesis in four OECD countries using a longer span of data (1870-2002 for Canada, the UK and the US, and 1885-2002 for Japan). Moreover, instead of using classic approaches, which are based on stationary I(0) or unit roots I(1) processes, we use methodologies based on fractional integration. After examining the order of integration of GDP growth rates and non-residential investment ratios for these countries, we do not find much evidence against the “growth effects” prediction of AK models. In fact, we only find clear evidence against this theory for the UK case.

Résumé

Résumé

D'après les modèles de croissance de type AK, un changement permanent du taux d'investissement a des effets permanents sur le taux de croissance d'un pays. Jones (Quarterly Journal of Economies, 1995, 110, 495-525) confirme cette prédiction en analysant les propriétés des séries temporelles des taux de croissance du PIB et des taux d'investissement pour quinze pays de l'OCDE pour la période 1950-1988. Dans ce papier, nous testons la même hypothèse pour quatre pays de l'OCDE pour un plus longue période (1870-2002 pour le Canada, le Royaume-Uni et les Etats-Unis, et de 1885-2002 pour le Japon). Aussi, au lieu d'utiliser une approche classique basée sur des processus 1(0) ou des processus de racine unitaire 1(1), nous utilisons une méthodologie basée sur l'intégration fractionnelle. Après avoir examiné l'ordre d'intégration des taux de croissance du PIB et des ratios d'investissement pour les pays mentionnés auparavant, nous ne pouvons pas rejeter la prédiction concernant les « effets de croissance » des modèles de croissance de type AK. En fait, nous ne pouvons rejeter cette prédiction que pour le cas du Royaume-Uni.

Keywords

Modèles de croissanceIntégration fractionnelleC32O41growth modelsfractional integration

JEL classification

C22: Time-Series Models • Dynamic Quantile Regressions • Dynamic Treatment Effect Models • Diffusion Processes O40: General
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 75 , Issue 2 , June 2009 , pp. 131 - 149
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2009 

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Footnotes

*

We would like to thank the Editor and two anonymous referees for improving this paper through their comments and suggestions. Juncal Cunado and Luis A. Gil-Alana gratefully acknowledge financial support from the Spanish Ministry of Science and Technology (SEJ2005-07657/ECON). Fernando Perez de Gracia acknowledges research support from the Spanish Ministry of Science and Technology and FEDER through grant SEJ2005-06302/ECON and from the Plan Especial de Investigacion de la Universidad de Navarra.

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