Title: A revisit to the incremental capital-output ratio: the case of Asian economies and Thailand

Authors: Hiroyuki Taguchi; Suphannada Lowhachai

Addresses: Competitiveness Development Office, Office of the National Economic and Social Development Board, Government of Thailand, 962 Krung Kasem Road Pomprab District, Bangkok 10100, Thailand ' National Accounts Office, Office of the National Economic and Social Development Board, Government of Thailand, 962 Krung Kasem Road Pomprab District, Bangkok 10100, Thailand

Abstract: This paper aims to examine the trend in the incremental capital-output ratio (ICOR) and its relationship with per capita GDP and GDP growth rate by utilising the panel data of a number of Asian economies and the historical time-series data of Thailand. It might be significant to know the linkage between growth and investment through the ICOR level, since Asian economies have faced serious needs for heavy investments to attain a targeted growth. The panel-data analysis confirmed that the gross ICOR had a positive correlation with per capita GDP and a negative association with GDP growth rate as expected in a theoretical model. The time-series analysis verified that the net ICOR was positively correlated with per capita GDP. Both analyses showed that industrial shares did not affect the level of the gross and net ICORs.

Keywords: incremental capital-output ratio; Asian economies; Thailand; investment requirement; per capita GDP; GDP growth rate; panel data; historical time-series data; gross ICOR; net ICOR; gross domestic product.

DOI: 10.1504/IJEPEE.2014.059891

International Journal of Economic Policy in Emerging Economies, 2014 Vol.7 No.1, pp.35 - 54

Available online: 18 Mar 2014 *

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