Does the AK model apply to the Chilean economy? Time-series evidence for the period of 1960-1998

Abstract

This paper is part of a series examining the relevance of the most important textbook growth models. The model of choice in this paper is an endogenous growth model. The AK model –chosen as a representative of an endogenous growth model - is applied to Chilean annual data (1960-1998) and tested. Chile was chosen as a case study, since the Chilean economy shows a respectable growth path that could either be characterized as endogenous or as neoclassical (transitional or steady state). The analysis revealed about two main insights. First, when analyzing long-term growth, the time series should be purged from short-run fluctuations. This can be achieved utilizing a filter. Second, in principle, the differences between the AK model and the neoclassical growth model might not be so significant, making it difficult to discriminate between them from both a theoretical and an empirical point of view.