Model uncertainty in cross-country growth regressions
Article first published online: 22 OCT 2001
Copyright © 2001 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 16, Issue 5, pages 563–576, September/October 2001
How to Cite
Fernández, C., Ley, E. and Steel, M. F. J. (2001), Model uncertainty in cross-country growth regressions. J. Appl. Econ., 16: 563–576. doi: 10.1002/jae.623
- Issue published online: 22 OCT 2001
- Article first published online: 22 OCT 2001
- Manuscript Revised: 22 JAN 2001
- Manuscript Received: 16 MAR 2000
We investigate the issue of model uncertainty in cross-country growth regressions using Bayesian Model Averaging (BMA). We find that the posterior probability is spread widely among many models, suggesting the superiority of BMA over choosing any single model. Out-of-sample predictive results support this claim. In contrast to Levine and Renelt (1992), our results broadly support the more ‘optimistic’ conclusion of Sala-i-Martin (1997b), namely that some variables are important regressors for explaining cross-country growth patterns. However, care should be taken in the methodology employed. The approach proposed here is firmly grounded in statistical theory and immediately leads to posterior and predictive inference. Copyright © 2001 John Wiley & Sons, Ltd.