Is Fixed Investment the Key to Economic Growth?

Magnus Blomström, Robert Lipsey and Mario Zejan

No 870, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper examines shares of fixed capital formation in GDP and rates of economic growth for more than 100 countries over successive five-year periods between 1965 and 1985 to determine the direction of causality between them. Simple regressions and multiple regressions including several standard determinants of growth, as well as a simple causality test, provide more evidence that increases in growth precede rises in rates of capital formation than that increases in capital formation precede increases in growth. High rates of fixed capital formation accompany rapid growth in per capita income, but we find no evidence that fixed investment is the only or main source of ignition for economic growth.

Keywords: Economic Growth; Investment (search for similar items in EconPapers)
JEL-codes: O40 O50 (search for similar items in EconPapers)
Date: 1993-11
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Related works:
Journal Article: Is Fixed Investment the Key to Economic Growth? (1996)
Working Paper: Is Fixed Investment the Key to Economic Growth? (1993)
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