Interlocking Global Business Systems: The Restructuring of Industries, Economies and Capital Markets

By Edward B. Flowers; Thomas P. Chen et al. | Go to book overview

Chapter 1
A Time Series Perspective on the Endogenous Growth Model: NIEs' and ASEAN's Experience

Xinpeng Xu

This chapter employs time series techniques to carry out an empirical test of the endogenous growth model in selected East Asian economies. The results show that there is little permanent change in growth rates for these economies. In contrast, both investment rate and openness sequences are nonstationary. This implies that permanent changes in investment rates and openness have no long- run effects on growth rates, which is contrary to what the endogenous growth model predicts. Time series tests in selected East Asian economies do not provide evidence to support the endogenous AK-type growth model.


INTRODUCTION

The rapid growth of East Asian economies in the last three decades has received considerable attention around the world. With the resurgence of interest in growth theory, one interesting and important question to ask is whether the growth of East Asian economies provides any evidence to support the endogenous growth theory, or alternatively, whether changes in some variables permanently affect the growth rate.

There are a wide variety of endogenous growth models. The most important difference between the endogenous growth model and the neoclassical growth model is that permanent changes in variables should lead to permanent changes in the growth rate according to endogenous growth models, while in the neoclassical growth model, the long-run growth rate is determined by exogenous technological change.

Most of the empirical studies on growth have used cross-country regression analysis to investigate the determinants of long-run growth. Barro ( 1991) used data for 98 countries from 1960 to 1985 and found that the growth rate of real per capita gross domestic product ( GDP) is positively related to initial human

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