Demystifying the Supply of Capital and Labour in a Nation’s Economic Chain | Zendy

Jie Zhou | Zendy; David Picken | Zendy; Chunlu Liu | Zendy

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Demystifying the Supply of Capital and Labour in a Nation’s Economic Chain

Author(s) -

Jie Zhou,

David Picken,

Chunlu Liu

Publication year - 2010

Publication title -

journal of sustainable development

Language(s) - English

Resource type - Journals

eISSN - 1913-9071

pISSN - 1913-9063

DOI - 10.5539/jsd.v3n4p30

Subject(s) - economics , impulse response , production (economics) , capital (architecture) , vector autoregression , gross domestic product , lag , regression analysis , variable (mathematics) , production function , industrial production , variables , product (mathematics) , economy , econometrics , macroeconomics , geography , mathematical analysis , computer network , mathematics , archaeology , computer science , geometry , machine learning

Public capital has been considered to be the wheels of economic activity in a nation or region. The reverse effect, the contribution of economic growth to public capital, is also worth analysis. The non-structural vector auto-regression (VAR) approach is performed for the Australian economy using yearly data for the 1960-2008 period. The optimal lag is investigated to build the VAR model that is then tested for stability. The impulse response function is further employed to examine the response of one economic variable to the innovation of others and to determine the lagged terms for the maximum absolute value of the other variables’ responses. The results will provide historical evidence for the federal and regional governments of Australia to estimate the effects of these production variables, in particular, the effect of infrastructure spending on the gross domestic product.