 A time-varying markov-switching model for economic growthBruno Morier and Vladimir Teles () No 305, Textos para discussão from FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil) Abstract: This paper investigates economic growth’s pattern of variation across and within countries using a Time-Varying Transition Matrix Markov-Switching Approach. The model developed follows the approach of Pritchett (2003) and explains the dynamics of growth based on a collection of different states, each of which has a sub-model and a growth pattern, by which countries oscillate over time. The transition matrix among the different states varies over time, depending on the conditioning variables of each country, with a linear dynamic for each state. We develop a generalization of the Diebold’s EM Algorithm and estimate an example model in a panel with a transition matrix conditioned on the quality of the institutions and the level of investment. We found three states of growth: stable growth, miraculous growth, and stagnation. The results show that the quality of the institutions is an important determinant of long-term growth, whereas the level of investment has varying roles in that it contributes positively in countries with high-quality institutions but is of little relevance in countries with medium- or poor-quality institutions. Date: 2011-11-30 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:fgv:eesptd:305 Access Statistics for this paper More papers in Textos para discussão from FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil) Contact information at EDIRC. |
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