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Nonlinearities in Cross-Country Growth Regressions: A Bayesian Averaging of Thresholds (BAT) Approach

Gernot Doppelhofer () and Jesus Crespo Cuaresma

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: We propose a Bayesian Averaging of Thresholds (BAT) approach for assessing the existence and quantifying the effect of threshold effects in cross- country growth regressions in the presence of model uncertainty. The BAT method extends the Bayesian Averaging of Classical Estimates (BACE) approach proposed by Sala-i-Martin, Doppelhofer, and Miller (2004) by allowing for uncertainty over nonlinear threshold effects. We apply our method to a set of determinants of long-term economic growth in a cross section of 88 countries. Our results suggest that when model uncertainty is taken into account there is no evidence for robust threshold effects caused by the Initial Income, measured by GDP per capita in 1960, but that the Number of Years an Economy Has Been Open is an important source of nonlinear effects on growth.

Keywords: Model Uncertainty; Model Averaging; Threshold Estimation; Non-Linearities; Determinants of Economic Growth (search for similar items in EconPapers)
JEL-codes: C11 C15 O20 O50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-ecm and nep-ets
Date: 2007-02
Note: Ec
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Journal Article: Nonlinearities in cross-country growth regressions: A Bayesian Averaging of Thresholds (BAT) approach (2007) Downloads
Working Paper: Nonlinearities in Cross-Country Growth Regressions: A Bayesian Averaging of Thresholds (BAT) Approach (2006) Downloads
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