Economic growth in a small island economy : the case of Cyprus, 1960-1995

The determinants of economic growth have long been of interest, and have been empirically investigated in a number of recent studies. A common question in this area is: why have some countries achieved high rates of economic growth whilst the others remained at lower levels? Evidence from the literature indicates that some countries, particularly East Asian countries or small island states exploiting their own comparative advantage, achieve very rapid rate of growth and catch up with already well-off countries. Others, in particular those from Sub-Saharan Africa, have very little or no growth. This thesis empirically investigates the determinants of economic growth in Cyprus over the period 1960-1995 to evaluate whether the Cypriot economic growth during this period is better explained in an 'old' or 'new' growth modelling framework. Advanced multivariate time series techniques are applied to test the validity of models and to examine the relative importance of different variables which may have an impact on both the long-run and short-run growth of the Cypriot economy. The empirical findings show that physical capital investment, human capital and tourism investment are the major causes of growth in the Cypriot economy.