How Have NESTs Grown? Explanations Based on Endogenous Growth Theory

The NEST or potential Emerging and growth-leading economies (EAGLEs) have been playing an increasing role in global growth, but the problems of their long-term growth attract the least attention, specifically the possibility of endogenous growth. The study was conducted to test for the endogenous growth possibility of the 15 NEST economies of the first wave. Based on macro data over 17 years, using the Bayesian non-linear regression method through the Metropolis-Hastings algorithm and Gibbs sampling, the author specified individual Constant elasticity of substitution (CES) functions for the researched economies. The Bayesian non-linear regressions are recognized as appropriate for empirical analysis of growth processes. The research revealed that out of the 15 studied NEST economies, the nine that have probably generated endogenous growth have acquired, on average, the higher magnitude of output growth, capital growth, FDI inflows, HDI, as well as expenditure on R&D. This is because these countries have implemented reasonable growth policies, such as encouraging investments from domestic and foreign companies, accumulating human capital, developing national R&D activities, extensively applying high technologies. Specifically, our findings are consistent with the predictions of Romer's endogenous growth theory