Are any growth theories linear? Why we should care about what the evidence tells us

Daniel Henderson (), Chris Papageorgiou () and Christopher Parmeter

MPRA Paper from University Library of Munich, Germany

Abstract: Recent research on macroeconomic growth has been focused on resolving several key issues, two of which, specification uncertainty of the growth process and variable uncertainty, have received much attention in the recent literature. The standard procedure has been to assume a linear growth process and then to proceed with investigating the relevant variables that determine growth across countries. However, a more appropriate approach would be to recognize that a misspecified model may lead one to conclude that a variable is relevant when in fact it is not. This paper takes a step in this direction by considering conditional variable uncertainty with full blown specification uncertainty. We use recently developed nonparametric model selection techniques to deal with nonlinearities and competing growth theories. We show how one can interpret our results and use them to motivate more intriguing specifications within the traditional studies that use Bayesian Model Averaging or other model selection criteria. We find that the inclusion of nonlinearities is necessary for determining the empirically relevant variables that dictate growth and that nonlinearities are especially important in uncovering key mechanism of the growth process.

Keywords: Growth Nonlinearities; Irrelevant Variables; Least Squares Cross Validation; Bayesian Model Averaging; Parameter Heterogeneity (search for similar items in EconPapers)
JEL-codes: C12 C14 C15 O10 O40 (search for similar items in EconPapers)
Date: 2008-05-13
New Economics Papers: this item is included in nep-dev, nep-ecm and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/8767/1/MPRA_paper_8767.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:8767

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().