Thresholds and Context Dependence in Growth

21 Pages Posted: 11 Jun 2000 Last revised: 9 Oct 2010

See all articles by Atish R. Ghosh

Atish R. Ghosh

International Monetary Fund (IMF) - Policy Development and Review Department

Holger C. Wolf

Georgetown University - Edmund A. Walsh School of Foreign Service (SFS)

Date Written: March 1998

Abstract

Is there a single recipe for fast growth? Much of the recent cross-section empirical growth literature implicitly assumes there is. Yet both development and growth theory as well as casual empiricism suggest pervasive non-linearities in the growth process. Low inflation may grease the wheels of commerce' while high inflation may arrest them, secondary education may be crucial for promoting growth in open economies, but be largely ineffective in war-ravaged countries, etc. Such threshold effects and context dependence are difficult to capture in standard multivariate regressions, but are readily identified by classification tree analysis, undertaken here. Our results suggest that both types of non-linearities are indeed pervasive. The findings go some way towards explaining the limited robustness of cross-country growth regressions, and argue against the existence of a universal growth recipe.

Suggested Citation

Ghosh, Atish R. and Wolf, Holger C., Thresholds and Context Dependence in Growth (March 1998). NBER Working Paper No. w6480. Available at SSRN: https://ssrn.com/abstract=226225

Atish R. Ghosh (Contact Author)

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Washington, DC 20431
United States

Holger C. Wolf

Georgetown University - Edmund A. Walsh School of Foreign Service (SFS) ( email )

Washington, DC 20057
United States
202-687-8079 (Phone)
202-687-8359 (Fax)

HOME PAGE: http://georgetown.edu/faculty/wolfhc/

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