This paper revises Sedgley's model of innovation-driven endogenous growth and applies it to the case of Taiwan. The methods of empirical mode decomposition (EMD) and constrained vector error correction (VEC model or VECM) are used in the process. The EMD is used to filter out very short term fluctuations in growth, while the VECM is used to detect the various factors that affect economic growth, including human capital, public and private capital, knowledge capital and public institutions (the index of protection of property rights). It is the first attempt to include such a rich set of factors affecting economic growth at least for the studies of Taiwan.
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