RATES, RATIOS AND PER CAPITA VARIABLES IN INTERNATIONAL MODELS: ANALYSIS OF INVESTMENT AND FOREIGN TRADE IN OECD COUNTRIES

Maria-Carmen Guisan

International Journal of Applied Econometrics and Quantitative Studies, 2008, vol. 5, issue 2

Abstract: Some econometric models try to explain the rate of growth of real Gross Domestic Product per capita as a function or ratios like Investment/GDP or Exports/GDP, with confusing results and conclusions which are misleading when the studies do not show a positive impact of the explanatory variables. Some of these approaches are inspired in the Solow model which is indeed interesting at a theoretical level when the hypotheses of the model hold in one country for a short period of time, but some hypothesis of the model do not hold in long samples of a same country or in international comparisons. Usually economic growth of real GDP per capital increases with Investment per capita but the Investment/GDP ratio usually diminish with the increase of Investment per capita. In the vase of these two explanatory variables it is much more convenient and realistic to use real values per capita instead of ratios for the explanation of economic development. Besides we include other considerations of interest regarding international differences of Exports per capita among countries. We present data, graphs and estimations of interest in this regard for 25 OECD countries.

Keywords: O51; O52; O54; O57 (search for similar items in EconPapers)
Date: 2008
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