Determinants of Growth in an Error: Correction Model for El Salvador
IMF Working Papers, July 1, 1998
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- Determinants of Growth in an Error: Correction Model for El Salvador
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Bibliographic details
- Authors: Armando Méndez Morales
- Published: July 1, 1998
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451947991.001
Executive summary and main findings
- An error-correction model identifies determinants of growth consistent with results from panel regressions based on a standard Cobb-Douglas production function for El Salvador for 1970-1995.
- Structural factors affect the technology variable, while macroeconomics and expectations explain the deviations from the long-run trend.
- Consistency of the parameters is satisfactory given the historical context of the sample period:
- Half of the sample period was affected by a civil war.
- 40 percent of the working population migrated to foreign countries during that period.
- The rapid process of economic reform after the advent of peace resulted in overlapping structural patterns.
Analytical approach and model specification
- Model type: Error-correction model calibrated against panel regressions.
- Production function basis: Standard Cobb-Douglas production function.
- Time coverage: 1970-1995.
- Key explanatory categories:
- Structural factors (impacting the technology variable / total factor productivity).
- Macroeconomic variables and expectations (explaining short-run deviations from trend).
Policy-relevant interpretation
- The error-correction framework provides a coherent decomposition of long-run growth determinants versus short-run deviations, useful for policy design that distinguishes structural reforms from macroeconomic and expectation management.
- The empirical parameter consistency despite severe disruptions (civil war, large migration, rapid reforms) suggests model robustness for retrospective analysis of El Salvador’s growth experience in 1970-1995.
Subjects and keywords (as classified in the source)
- Subjects: Education, Foreign exchange, Labor, Labor force, Production, Public expenditure review, Real effective exchange rates, Total factor productivity.
- Keywords: capital destruction, capital stock, Central America, Cobb-Douglas production function, constant returns to scale, Econometrics, equation decline, exchange rate, Growth, Labor force, labor productivity growth, log, per-capita GDP growth, physical capital, Real effective exchange rates, Total factor productivity, total factor productivity growth, WP.
Content in this bundle
- Determinants of Growth in an Error-Correction Model for El Salvador - WP/98/104