THE ENDOGENEITY OF THE STEADY-STATE GROWTH RATE

Abstract

This study aims to estimate the steady-state growth rate or the natural growth rate and to determine whether the steady-state growth rate is endogenous to demand conditions or not. In order to achieve these aims, this study makes an econometric analysis using ordinary least squares method based on the data of Turkey covering the period 1969-2006. The present study estimates the natural growth rate and analyzes whether the natural growth rate is endogenous or not. But, different from the previous studies, the present study makes estimations in the conditions that capital-output ratio remains constant. According to the results of the study, the steady-state or natural growth rate is 5.71% in Turkey for the period 1969-2006. Moreover, the natural growth rate becomes 9.51% in the boom periods. This result shows that the steady-state or natural growth rate is endogenous to demand conditions in Turkey. Thus, the present study provides evidence for the Thirlwall’s (1969) theory in a different manner. Keywords: Natural growth rate, endogeneity, steady-state, capital-output ratio, economic history of Turkey