Determination of Potential Growth Using Panel Techniques

Kappler, Marcus

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URN: urn:nbn:de:bsz:180-madoc-9192
Document Type: Working paper
Year of publication: 2004
The title of a journal, publication series: None
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: O57 O47 C32 ,
Subject headings (SWD): Wirtschaftswachstum , Kointegration , Panelanalyse
Abstract: The aim of this paper is to construct an indicator of potential growth for developed countries using the insights of the theoretical and empirical growth literature. The Pooled Mean Group Estimator of Pesaran, Shin and Smith (1999) that employs a panel data technique is used. This estimator is suited for integrated annual macroeconomic panel data sets to estimate long-run relationships between GDP per capita and its determinants of the underlying cross-section of 12 industrial countries. Since this long-run relationship describes a sort of structural relationship, one can use the fitted model to calculate an indicator of potential growth. The first part of the paper reviews the existing growth literature with a special focus on industrial countries in order to motivate for the used variables in the econometric analysis. The next part explains the concept of panel unit roots and panel cointegration and introduces the underlying empirical approach. Next, empirical results are presented and discussed. Then, the calculation of the potential growth indicator is demonstrated. The last part of this paper concludes.
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