indication of the robustness of the results is that no serial correlation was found
after the lag length has been chosen by SIC.Because openness is always regarded as one of the important variables
which influences growth rates ( Frankel and
Romer, 1996), the stationarity of the
openness series is also of interest. Table 1.3 shows the time series properties of
openness for the selected East Asian economies. A strong time trend is evident
in the series. The ADF test reveals that the data-generating process of the
openness series is not stationary.Taking all these results into consideration, we have a clear picture of the
time series properties of growth rates, investment rates and openness. The
growth rates of selected East Asian economies experienced little permanent
changes during the sample period. The ADF test reveals that the growth rate
sequence is systematically stationary in these economies. The economic
implication of a stationary sequence for the growth rate is that permanent
changes in other variables do not have a permanent effect on the growth rate.
Shocks to the growth rate may have short run effects, but eventually, the growth
rate will return to its unconditional mean. In contrast, investment rates for the
selected East Asian economies exhibit a strong positive trend in the sample
period. The ADF test also reveals that the investment rate sequence and the
openness sequence are not stationary. One simple interpretation of these
nonstationary time series sequences is that changes in these variables are
permanent. The series will not revert to its unconditional mean.Our discussion of the AK type endogenous growth model showed that what
this kind of model predicts is that permanent changes in some X variables that
are potentially affected by government policy will lead to permanent changes in
growth rates. But the empirical results in selected East Asian economies show
that growth rates do not experience permanent change in the sample period. This
may suggest two cases, as argued by Jones ( 1995), either:
|a. ||X must exhibit no large persistent movements, or|
|b. ||some other variable (or variables) must also have persistent effects on growth that
offset the movements of X in a way that is determined by the endogenous growth
It is difficult to think of a variable that could offset the positive effect of
investment rates. Therefore it is obvious that permanent changes in investment
rates do not have a permanent effect on the growth rate. Case 1 does not require
testing, since only investment rates are nonstationary. Case 2 becomes the
empirical result of this study. It becomes clear that time series tests do not
provide any evidence to support the endogenous growth model, at least in the
experience of newly industrialized economies (NIEs) and the Association of
Southeast Asian Nations (ASEANs).
SUMMARY AND CONCLUSION
Time series tests for growth rates, investment rates and for openness have
been conducted for the NIEs and ASEAN economies. The results show that
there is little permanent change in the growth rates of these economies. The
Questia, a part of Gale, Cengage Learning. www.questia.com
Book title: Interlocking Global Business Systems:The Restructuring of Industries, Economies and Capital Markets.
Contributors: Edward B. Flowers - Editor, Thomas P. Chen - Editor, Jonchi P. Shyu - Editor.
Publisher: Quorum Books.
Place of publication: Westport, CT.
Publication year: 1999.
Page number: 17.
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