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This paper is concerned with the role of the output-capital ratio in growth models. In the first part we highlight the behaviour of the output-capital ratio along the balanced growth path in the models of Solow (1956) and Romer (1986). In the second part we assess the stability of the ratio for some industrial countries.

A key prediction of standard models of economic growth is that the output–capital ratio is constant along the economy's balanced growth path. Using data for 16 OECD countries over 135 years we examine whether the output–capital ratio reverts to a constant in the long run using univariate and panel stationarity tests with structural breaks. Univariate stationarity tests with one break provide more evidence of trend reversion than mean reversion. However, in stationarity tests with two breaks and with up to five breaks, the results are largely independent of the inclusion of a trend. When we allow for up to five breaks in the intercept we find that for 12 of the 16 countries, the output–capital ratio is mean reverting and when we allow for up to five breaks in the intercept for 11 of the 16 countries, the output–capital ratio is trend reverting. We also find that for the panel as a whole the output–capital ratio is mean reverting and trend reverting when we allow for up to five breaks.

Die Studie untersucht die Brauchbarkeit des Kapitalkoeffizienten als Instrument der empirischen Wirtschaftsforschung am Beispiel Deutschlands (1850 bis 1965) und den Vereinigten Staaten (1890-1960). Für die Bundesrepublik Deutschland wird der Untersuchungszeitraum bis 1999 ergänzt.

Themen

Zeitreihen im Recherche- und Downloadsystem HISTAT:

- Die Entwicklung des Kapitalkoeffizienten in Deutschland und USA (1850-1965)
- Der marginale Kapitalkoeffizient in Deutschland und USA (1851-1965)
- Marginaler Kapitalkoeffizient und Wachstumsrate des Bruttosozialproduktes (1951-1968)
- Bruttoinlandsprodukt, Kapitalstock und Kapitalkoeffizient in Preisen von 1985 (1950-1990)
- Bruttoinlandsprodukt, Kapitalstock und Kapitalkoeffizient in Preisen von 1995 (1991-1999)
- Wertschöpfung und Kapitalstock nach Walther G. Hoffmann in Preisen von 1913 (1850-1959)

This study investigates the interrelationship between bank capital and liquidity creation in the Indian banking sector. The sample considers 68 commercial banks (public, private and foreign banks) operating in India during the period from 1996–1997 to 2013–2014. We employ the generalised method of moments technique in a Granger causality framework and find a bidirectional relationship between bank capital and liquidity creation for the entire sample. Our results support the financial fragility–crowding-out hypothesis, which suggests that Indian banks follow a fragile financial structure to maximise liquidity creation and increase their capital ratio by crowding out deposits to limit liquidity creation. Our results also support the liquidity substitution hypothesis, which suggests that stable liabilities can be substituted for bank capital, while facing more risk. We find similar results with the whole sample regardless of ownership, size, capitalisation and periods. These findings have implications for bank managers and policymakers on formulating appropriate policy for capital and liquidity creation of commercial banks in India. JEL Codes: G20, G21, G33