A Study Of The Effects Of Aggregate Demand Components On Long-run Economic Growth

This dissertation argues the role of demand-side factors in the long-run economic growth. According to traditional macroeconomic theories, the demand-side factors only affect the short-run economic fluctuation but the long-run economic growth is less studies.The dissertation tries to establish a systemic connection between the demand factors and the economic growth. So the principle of effective demand can be expanded to long-term growth analysis. Its basic viewpoint is that there does exist the mutual feedback effects between consumption demand and growth. Firstly, as an induced mechanism of investment, consumption demand pulls economic growth. Secondly, the feedback between demand and growth realizes through technological innovation which is pulled by the consumption demand. Finally, the economic structural change created from demand pulls economic growth.The dissertation elaborates from empirical analysis and theoretical analysis based on comparative analysis, statistical analysis, econometric method and theory model. The main conclusions of this dissertation are as follows:(1) For these economies which experience the continuous high-speed growth after WWII, most of them depend on domestic investment and consumption to pull the fast growth at the initial stage. All of them take the export-led growth strategy at the different stages of the high growth, but most of them still follow the growth way pulled by the"weak domestic demand", that is domestic demand and export increase simultaneously and the contribution of the former is more.(2) The effect of the consumption-pulled growth does exist after examines the Granger causality relations between GDP, exports, and consumption among these economies. As a panel group, the author finds the bidirectional causality does exist between export and output, and between consumer and GDP. (3) China's economic growth also exhibits domestic demand-led. Although contribution of export has increase since 1990s, the growth has still been weakly domestic demand-led. From the angle of industry, it also proves that domestic demand plays an important role in the increase of industrial output, especially for industries which produce final products, by using structural decomposition analysis. Panel VAR test to the data of provincial level also shows the causal relationship between demand and output growth.Based on the results of empirical study, this dissertation puts the emphasis on the three mechanisms of how consumption demand affects growth. These are the consumption-induced investment, the comsumption-pulled technological innovation and the consumption-led structural change.(4) The effect of consumption demand on investment is, on the one hand, demand change incentives of investment, on the other hand, investment creates new market, not only the additional income created by it, but also it led the change of output composition. Output growth depend on invest, and later is sustain by consumption demand.(5) the demand-pulled innovation comes from following effects, on the one hand, demand can been as"pure incentive mechanism", which is very useful to analysis the process innovation or the incremental product innovation; on the other hand, demand can pull innovation through reducing the firm's uncertainty about future profits.(6) Demand can led structural change. The increase of domestic demand can improve product quality and reduce production cost because of the effect of"learning by doing"and the consumer's satiation about the old goods and demand for new goods also can pull the change of industrial structure.The main innovative points in this dissertation are as follows:(1) It does a comparative study about effects of the demand components on economic growth, both those economies which experience high growth and those economies which have the same per capita GDP level, from 1000 international dollar(1990) to 6000 international dollar(1990). (2)By using the time series VAR and Panel VAR, this dissertation examines the relationship between export, consumption and output at the high growth periods both on the level of individual economies and as the group of those economies. Both differences and commons among them are studied.(3) By adopting Structural Decomposition Analysis(SDA), it splits those industries into eight sectors to understand the demand source of structural change by using input-output analysis.(4) Based on the quality ladder model, it analyzes the demand-pulled innovation by incorporating the heterogeneous consumer preference heterogeneous and the uncertainty of the degree of the quality improvement of products.(5) Under the setting of the hierarchy demand, it analyzes the effect of demand size and income inequality on the structural change and economic growth.