The Great Wars, The Great Crash, and the Unit Root Hypothesis: Some New Evidence About an Old Stylized Fact / Dan Ben-David, David H. Papell.

Format:

Book

Author/Creator:

Ben-David, Dan.

Contributor:

National Bureau of Economic Research.

Papell, David H.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4752.

NBER working paper series no. w4752

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The Great Wars, The Great Crash, and the Unit Root Hypothesis

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1994.

Summary:

For decades, the prevailing sentiment among economists was that growth rates remain constant over the long run. Kaldor considered this to be one of the six important 'stylized facts' that theory should address, and until the emergence of endogenous growth models, this was a fundamental feature of growth theory. This paper uses an endogenous trend break model to investigate the unit root hypothesis for 16 countries, using annual GDP data spanning up to 130 years. Rejection of the unit root, which is facilitated by the inclusion of a trend break, introduces the possibility of examining the long run behavior of growth rates. We find that most countries exhibited fairly steady growth for a period lasting several decades. The termination of this period was usually characterized by a significant, and sudden, drop in GDP levels. But rather than simply returning to their previous steady state path, as predicted by the standard neoclassical growth model, most countries continued to grow at roughly double their prebreak rates for many decades, even after their original growth path had been surpassed.

Notes:

Print version record

May 1994.