Stochastic Growth: Empirical Evidence from the G7 Countries

Posted: 20 Jul 1999

See all articles by Lucio Sarno

Lucio Sarno

City University London - Sir John Cass Business School; Centre for Economic Policy Research (CEPR)

Abstract

This paper provides a methodological contribution to the empirical literature on stochastic economic growth. The augmented Solow-Swan model with stochastic capital accumulation rates and labor force growth implies that the steady-state labor productivity level towards which an economy converges varies over time and across countries, and the adjustment process towards long-run equilibrium follows a nonlinear process. Using post-war data for the G7 countries, we provide strong empirical evidence supporting the existence of the long-run relationship implied by the augmented Solow-Swan model. Moreover, the hypothesis of linearity of the adjustment towards long-run equilibrium is rejected in favor of a logistic smooth transition autoregressive process.

JEL Classification: E30, O10

Suggested Citation

Sarno, Lucio, Stochastic Growth: Empirical Evidence from the G7 Countries. Journal of Macroeconomics, Vol. 21, No. 4, Fall 1999. Available at SSRN: https://ssrn.com/abstract=160648

Lucio Sarno (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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