Is There Endogenous Long-Run Growth?: Evidence from the U.S. And the U.K.

JOURNAL OF MONEY, CREDIT AND BANKING, Vol. 29, No. 2, May 1997

Posted: 3 Feb 1997

See all articles by Narayana Kocherlakota

Narayana Kocherlakota

University of Minnesota - Twin Cities - Department of Economics

Kei-Mu Yi

Federal Reserve Banks - Federal Reserve Bank of Dallas

Multiple version iconThere are 2 versions of this paper

Abstract

The key feature of endogenous growth models is that they imply that permanent changes in government policy can have permanent effects on growth rates. In this paper we develop and implement an empirical framework to test this implication. In a regression of growth rates on current and lagged policy variables the sum of the slope coefficients for each policy variable should be nonzero (zero) for endogenous (exogenous) growth models. In our estimation we use time series data spanning up to 100 years for the United States and 160 years for the United Kingdom. We find that the implication for exogenous growth is usually rejected when both a tax variable and a public capital variable are included in the regression; failing to include both variables biases the results in favor of exogenous growth models. Our findings show that it is possible to have endogenous growth even when U.S. and U.K. GDP growth rates appear to be stable over time. We conclude that at the aggregate level, the production function appears to exhibit constant returns to scale in reproducible inputs.

JEL Classification: O41, O51, O52

Suggested Citation

Kocherlakota, Narayana and Yi, Kei-Mu, Is There Endogenous Long-Run Growth?: Evidence from the U.S. And the U.K.. JOURNAL OF MONEY, CREDIT AND BANKING, Vol. 29, No. 2, May 1997, Available at SSRN: https://ssrn.com/abstract=3689

Narayana Kocherlakota (Contact Author)

University of Minnesota - Twin Cities - Department of Economics ( email )

271 19th Avenue South
Minneapolis, MN 55455
United States
612-625-5318 (Phone)
612-624-0209 (Fax)

HOME PAGE: http://www.econ.umn.edu/~nkocher/

Kei-Mu Yi

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

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