How to Predict the Economic Growth Rates of a Country？ A DSGE Model with the Accumulation of Human Capital

Junlin Mu and Lipeng Yan

Applied Economics Letters, 2023, vol. 30, issue 11, 1540-1560

Abstract: We propose an endogenous economic growth DSGE model based on human capital accumulation theory. Then we estimate the DSGE model by the Bayesian method, using the economic data of China, the USA, and Japan from 1996: Q1 to 2018: Q4. It is shown that the estimated models can accurately predict the economic growth rates of the three countries and can tightly fit the economic data of the three countries. Therefore, the model proposed can be employed to predict the economic growth of a typical country and to analyse the determinants of its economic growth in the short and long term. We find that levelling up technology in all fields is helpful for economic growth in the short term, and stimulating labour supply, mitigating monopoly in the goods market and labour market, and increasing the contribution of physical capital in goods production are helpful for economic growth in the long term.

Date: 2023
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DOI: 10.1080/13504851.2022.2069669

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