Business Intelligence

Robust Growth Determinants

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Executive Summary

This paper investigates the robustness of determinants of economic growth in the presence of model uncertainty, parameter heterogeneity and outliers. The robust model averaging approach introduced in the paper uses a flexible and parsimonious mixture modeling that allows for fat-tailed errors compared to the normal benchmark case. Applying robust model averaging to growth determinants, the paper finds that eight of eighteen variables found to be significantly related to economic growth by Sala-i-Martin et al. (2004) are sensitive to deviations from benchmark model averaging.

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