Validity of Balanced Growth: Evidence from Turkey

Year 2016, Issue: 76, 205 - 226, 01.06.2016

Mehmet Çınar Sema Ay

Abstract

One of the central hypotheses of neoclassical growth literature is the balanced growth hypothesis, which predicts that output, consumption and investment grow at the same rate. Empirically, this implies that consumption and investment must be cointegrated with output. This paper investigates these implications with respect to Turkey, using unit root tests and co-integration techniques. We find that the long-term growth path of Turkish economy is consistent with the balanced-growth hypothesis without a significant structural break

Keywords

Great ratios, balanced growth, unit roots, co-integration, endogenous structural breaks

Dengeli Büyümenin Geçerliliği : Türkiye Örneği

Abstract

Neoklasik Büyüme Teorisi’ne ait literatürün temelinde çıktı, tüketim ve yatırımın aynı oranda büyümesini öngören “dengeli büyüme” hipotezi yer almaktadır. Ampirik olarak bu hipotez, tüketim ve yatırımın çıktı ile kointegre olmasını ifade etmektedir. Çalışma, söz konusu göstergelerin birim kök testleri ve kointegrasyon teknikleri kullanılarak Türkiye için incelenmesini amaçlamaktadır. Türkiye ekonomisinin uzun dönemli büyüme yolunun önemli bir yapısal kırılma yaşamaksızın dengeli büyüme ile uyumlu olduğu görülmektedir.

Keywords

Büyük oranlar, dengeli büyüme, birim kök, eştümleşme, içsel yapısal kırılma

References

• Aghion, Phillipe and Peter Howitt (1998). Endogenous Growth Theory (second printing). The MIT Press, Cambridge.
• Ando, Albert and Franco Modigliani (1963). “The ‘live cycle’ Hypothesis of Saving: Aggregate Implications and Tests”. American Economic Review (53): 55-84.
• Andrews, Donald W. K. (1991). “Heteroscedasticity and Autocorrelation Consistent Covariance Matrix Estimation”. Econometrica (59): 817–858.
• Andrews, Donald W. K. and J. Christopher Monahan (1992). “An Improved Heteroscedasticity and Autocorrelation Consistent Covariance Matrix Estimator”. Econometrica (60): 953–966.
• Attfield, Cliff and Jonathan R. W. Temple (2006). “Balanced Growth and the Great Ratios: New Evidence for the US and UK”. Centre for Growth and Business Cycle Research Discussion Paper No. 75. Available at http://www.socialsciences.manchester.ac.uk/cgbcr/dpcgbcr/dpcgbcr75. pdf. Accessed 26 November 2012.
• Baharumshah, Ahmad Zubaidi (2004). “Stock Prices and Long-Run Demand for Money: Evidence from Malaysia”. International Economic Journal (18): 389-407.
• Bai, Jushan and Pierre Perron (2003). “Computation and Analysis of Multiple Structural Change Models”. Journal of Applied Econometrics 18(1): 1-22.
• Bhargava, Alok (1986). “On the Theory of Testing for Unit Roots in Observed Time Series”. Review of Economic Studies 53(3): 369-384.
• Clemente, Jesus A., Antonio Montanes and Montserrat Ponz (1999). “Are the Consumption/Output and Investment/Output Ratios Stationary? An International Analysis”. Applied Economic Letter 6(10): 687–691.
• Dickey, David A. and Wayne A. Fuller (1979). “Distribution of the Estimator for Autoregressive Time Series with a Unit Root”. Journal of the American Statistical Association 74 (366): 427-431.
• _____, (1981). “Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root”. Econometrica 49(4): 1057-1072.
• Elliott, Graham, Thomas J. Rothenberg and James H. Stock (1996). “Efficient Tests for an Autoregressive Unit Root”. Econometrica 64(4): 813-836.
• Engle, Robert F. and Clive William John Granger (1987). “Co-Integration and Error Correction: Representation, Estimation and Testing”. Econometrica 55(4): 251-276.
• Granger, Clive William John and Grayham E. Mizon (1993). Advanced Texts in Econometrics. Oxford: Oxford University Press.
• Hakkio, Craig S. and Mark Rush (1991). “Co-Integration: How Short is the Long-Run?”. Journal of International Money and Finance (10): 571–581.
• Harvey, David, Stephen Leybourne and Paul Newbold (2003). “How Great are the Great Ratios?”. Applied Economics 35(2): 163-177.
• Hatemi-J, Abdulnasser and Manuchehr Irandoust (2000). “Time-Series Evidence for Balassa’s Export-Led Growth Hypothesis”. Journal of International Trade and Economic Development (9): 355–365.
• Johansen, Soren (1995). Likelihood-Based Inference in Cointegrated Vector Autoregressive Models. Oxford: Oxford University Press.
• Kaldor, Nicholas (1961). Capital Accumulation and Economic Growth. Lutz FA, Hague DC The Theory of Capital. MacMillan, London.
• Kemper, Niels, Dierk Herzer and Luca Zamaparelli (2010). “Balanced Growth and Structural Breaks: Evidence for Germany”. Empirical Economics 40(2): 409-424.
• Klein, Lawrence R. and Richard F. Kosobud (1961). “Some Econometrics of Growth: Great Ratios of Economics”. Quarterly Journal Economics (75): 173-198.
• Kunst, Robert and Klaus Neusser (1990). “Co-Integration in a Macroeconomic System”. Journal of Applied Econometrics 5(4): 351–365.
• Kuznets, Simon (1942). Uses of National Income in Peace and War. National Bureau of Economic Research, New York.
• Lahiri, Kajal and Nlandu Mamingi (1995). “Power Versus Frequency of Observation-Another View”. Economics Letters (49): 121–124.
• Li, Hong and Vincent Daly (2009). “Testing the Balanced Growth Hypothesis: Evidence from China”. Empirical Economics 37(1): 185- 200.
• Meckl, Jürgen (2002). “Structural Change and Generalized Balanced Growth”. Journal of Economics 77(3): 241-266.
• Mills, Terence C. (2001). “Great Ratios and Common Cycles: Do They Exist for the UK?”. Bulletin of Economic Research 53(1): 35–51.
• Neusser, Klaus (1991). “Testing the Long-Run Implications of the Neoclassical Growth Model”. Journal of Monetary Economics (27): 3-37.
• Ng, Serena and Pierre Perron (1995). “Unit Root Tests in ARMA Models with Data-Dependent Methods for the Selection of the Truncation Lag”. Journal of the American Statistical Association 90(429): 268-281.
• _____, (2001). “Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power”. Econometrica 69(6): 1519-1554.
• Osterwald-Lenum, Michael (1992). “A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Co-Integration Rank Test statistics”. Oxford Bulletin of Economics and Statistics 54(3): 461–472.
• Phillips, Peter C. B. and Pierre Perron (1988). “Testing for Unit Roots in Time Series Regression”. Biometrika 75(2): 335-346.
• Rivera-Batiz, Luis A. and Paul M. Romer (1991a). “International Trade with Endogenous Technological Change”. European Economic Review (35): 971-1004.
• _____, (1991b). “Economic Integration and Endogenous Growth”. The Quarterly Journal of Economics: 531-55.
• Romer, Paul M. (1986). “Increasing Returns and Long-Run Growth”. Journal of Political Economy 94(5): 1002-1037.
• Romer, David (1996). Advanced macroeconomics. The McGraw-Hill Companies Inc.
• Schwert, William G. (1989). “Tests for Unit Roots: A Monte Carlo Investigation”. Journal of Business and Economic Statistics 7(2): 147-159.
• Serletis, Apostolos (1994). “Testing the Long-Run Implications of the Neoclassical Growth Model for Canada. Journal of Macroeconomics 16(2): 329–346.
• Serletis, Apostolos and Thomas Krichel (1995). “International Evidence on the Long-Run Implications of the Neoclassical Growth Model”. Applied Economics 27(2): 205–210.
• Shiller, Robert J. and Perron, Pierre (1985). “Testing the Random Walk Hypothesis: Power Versus Frequency of Observation”. Economics Letters 18: 381-386.
• Thornton, John (1998). “Real Stock Prices and the Long-Run Demand for Money in Germany”. Applied Financial Economics (8): 513-517.