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Economic Growth under Stochastic Population and Pollution Shocks

Théophile T. Azomahou, Tapas Mishra () and Mamata Parhi

Manchester School, 2015, vol. 83, issue 3, 314-345

Abstract: type="main"> We study dynamics of interactions among economic growth, population, and environmental quality when stochastic shocks in these systems display long-memory property. We make two important contributions. First, we show that the long-memory persistence in economic growth is determined jointly by the convergence speed of shocks in both environmental quality and population. Second, by simulating a modified Solow-Swan economy we demonstrate that the convergence-speed of shocks in these systems significantly affects the long-run growth trajectory of output. Our empirical examination evince that adjustment of output to long-run equilibrium is very slow, thanks to the slowly dissipating population and pollution shocks.

Date: 2015
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