DP2537 Nonlinear Dynamics, Spillovers and Growth in the G7 Economies: An Empirical Investigation

Author(s): Lucio Sarno
Publication Date: August 2000
Keyword(s): Economic Growth, Equilibrium Correction, Nonlinear Dynamics, Spillover
JEL(s): C32, F43, O40
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2537

This paper proposes an empirical growth model which is consistent with a stochastic steady-state labour productivity level varying over time and across countries, where the disequilibrium mechanism leading to long-run equilibrium follows a nonlinear equilibrium correction model. Using data for the G7 economies during the postwar period since 1950, the empirical analysis yields a long-run model which implies plausible estimates of the production function parameters. Postwar economic growth in each of the G7 countries appears to be well characterized by a nonlinear equilibrium correction model where the dynamic adjustment towards long-run equilibrium is governed by a logistic function, while also capturing spillover effects in growth dynamics.