On Harrod’s natural rate of growth and the role of demand: an empirical assessment
DOI:
https://doi.org/10.29201/peipn.v8i16.303Keywords:
Growth, measurement of economic growth, United States, Canada, MéxicoAbstract
Starting from the seminal contribution of Harrod (1939), the current paper tests the hypothesis of endogeneity of the natural growth rate of output vis-à-vis aggregate demand fluctuations for the NAFTA economies (Canada, Mexico and the United States). Empirical results show that potential out-put reacts to fluctuations in actual growth rates, thus signaling that deflation may lead to stagbilisation (stagnation cum stabilisation) as depression of both effective demand and employment impart deleterious effects on the actual rate of economic growth. Under elastic conditions of the supply-side of the economy, neglect of the role played by demand does not contribute to a better understanding of the determinants of economic growth.
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