Balanced growth and structural breaks: Evidence for Germany

Dierk Herzer, Niels Kemper and Luca Zamparelli

MPRA Paper from University Library of Munich, Germany

Abstract: One of the central hypotheses of the neoclassical growth literature is the balanced- growth hypothesis, which predicts that output, consumption, and investment grow at the same rate. Empirically, this implies that the consumption-to-output ratio and the investment-to-output ratio must be stationary and that consumption and investment must be cointegrated with output. This paper tests these implications with respect to Germany, using unit root tests and cointegration techniques that allow for an endogenously determined structural break. We find that the long-run growth path of the German economy is consistent with the balanced-growth hypothesis if we allow for a structural break associated with the worldwide productivity slowdown of the early 1970s.

Keywords: Balanced; growth; ×; Unit; roots; ×; Cointegration; ×; Endogenous; structural; breaks (search for similar items in EconPapers)
JEL-codes: C32 D91 E23 (search for similar items in EconPapers)
Date: 2009-03
New Economics Papers: this item is included in nep-bec and nep-fdg
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Related works:
Journal Article: Balanced growth and structural breaks: evidence for Germany (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:14944

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