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Title: Analytical Aspects of Short-run Growth
Authors: Bose, Amitava
Chattopadhyay, Subhasankar
Keywords: Short-run growth
consumption-driven growth
investment-driven growth
demand-determined growth
full-capacity growth
Issue Date: 1-Feb-2010
Series/Report no.: WORKING PAPER SERIES;WPS No. 650/ February 2010
Abstract: This paper studies the short-run and medium-run aspects of economic growth under two alternative frameworks. These are: (i) a demand-determined growth model with excess capacity having Keynesian features; and (ii) a full-capacity Harrod-Domar model modified to include autonomous consumption. While much of growth theory is about the long-run understanding contemporary growth experience requires application of short-run analysis. The analysis is applied to address the following questions, among others: (a) To what extent does a change in the rate of exponential growth signal a ‘structural break’? (b) What are the appropriate analytical definitions of consumption-driven growth and investment-driven growth? (c) What observable characteristics of a growth path help identify if growth (or a change in growth) is consumption-driven in contrast to its being investment-driven? The analysis brings out the relation between growth rates of autonomous consumption, investment and GDP, emphasizing the difference in conclusions in the two models.
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