What Does the Growth-Investment Correlation Mean?
Very interesting:
Robert's Stochastic thoughts : "Testing for cross country heterogeneity in growth models using a finite mixture approach: Marco Alfo', Giovanni Trovato, and Robert J. Waldmann: We use an empirical model to test if the economic growth can beconsidered exogenous in the Solovian sense. We apply multivariatemixture model proposed by Alfo' and Trovato (2004) to the Bernanke and Gurkainak (2000) extension of the Solow model. We find that the explanatory power of the Solow growth model is enhanced, since growth rates are not statistically significantly associated with investment rates, when cross-country heterogeneity is considered. Moreover, we find no sign of convergence to a single equilibrium.
