Unraveling the Fortunates of the Fortunate: An Iterative Bayesian Model Averaging (IBMA) Approach

Theo Eicher, Chris Papageorgiou () and Oliver Roehn
Authors registered in the RePEc Author Service: Oliver Röhn ()

No 1907, CESifo Working Paper Series from CESifo

Abstract: We investigate country heterogeneity in cross-country growth regressions. In contrast to the previous literature that focuses on low-income countries, this study also highlights growth determinants in high-income (OECD) countries. We introduce Iterative Bayesian Model Averaging (IBMA) to address not only potential parameter heterogeneity, but also the model uncertainty inherent in growth regressions. IBMA is essential to our estimation because the simultaneous consideration of model uncertainty and parameter heterogeneity in standard growth regressions increases the number of candidate regressors beyond the processing capacity of ordinary BMA algorithms. Our analysis generates three results that strongly support different dimensions of parameter heterogeneity. First, while a large number of regressors can be identified as growth determinants in Non-OECD countries, the same regressors are irrelevant for OECD countries. Second, Non-OECD countries and the global sample feature only a handful of common growth determinants. Third, and most devastatingly, the long list of variables included in popular cross-country datasets does not contain regressors that begin to satisfactorily characterize the basic growth determinants in OECD countries.

Keywords: growth regressions; growth determinants of OECD countries; parameter heterogeneity; model uncertainty; Iterative Bayesian Model Avering (search for similar items in EconPapers)
JEL-codes: O40 O47 O51 O52 (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Journal Article: Unraveling the fortunes of the fortunate: An Iterative Bayesian Model Averaging (IBMA) approach (2007)
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