On the Convergence Speed in Growth Models
Faculty of Economics & Management Magdeburg (FEMM) Working Paper No. 22/2000
21 Pages Posted: 10 Oct 2000
The growth literature is concerned with the convergence speed of economies providing valuable information on the speed at which out-of-steady state-economies move towards their long-run equilibria. Prominent examples of papers on that topic include Mankiw/Romer/Weil (1992) and Barro/Sala-i-Martin (1992) both empirically oriented, and Jones (1995) and Ortigueira/Santos\ (1997) being theoretically focused. A common shortcoming of such studies is that any convergence speed measure employed is usually derived by linearization around the steady state. However, knowledge of the convergence speed is important only if an economy is not already in the vicinity of its long-run equilibrium. The current paper presents a method, which allows to quantify the occuring error due to linearization in any growth model featuring stable steady states. Neoclassical growth theory is used to introduce the methodology itself. Applications to some growth models are presented, too.
JEL Classification: O40, O41, C69
Suggested Citation: Suggested Citation