TESTING THE LONG-RUN IMPLICATIONS OF THE NEOCLASSICAL GROWTH-MODEL FOR CANADA

This paper uses the Backus and Kehoe (1992) data to test the long-run implications of the neoclassical stochastic growth model for Canada, u sing Johansen's (1988) maximum likelihood approach for estimating and testing long-run steady-state relations in multivariate vector autoreg ressive models. Although two long-run equilibrium relationships are de tected for the 1929-1983 subsample, the hypotheses that the log ratios of consumption to output, and investment to output, are stationary ar e both rejected.