Fractional Calculus in Economic Growth Modelling of the Group of Seven

This paper presents models of economic growth for all the countries of the Group of Seven (G7) in the 1973–2016 period. The models consist of differential equations, of both integer and fractional order, where the gross domestic product (GDP) is a function of the country’s land area, arable land, population, school attendance, gross capital formation (GCF), exports of goods and services, general government final consumption expenditure (GGFCE), and broad money (M3). Results show that fractional models have a better performance, measured by several summary statistics, without increasing the number of parameters, or sacrificing the ability to predict GDP evolution in the short term. A standard validation procedure for economic growth models is presented for the assessment of future models.