Abstract
This paper investigates the relationship between economic growth and growth volatility through simultaneous equations system. By employing the identification through heteroskedasticity method of Rigobon (Rev Econ Stat 85:777–792, 2003) and using a panel of 158 countries over the period 1960–2010, we find that output volatility is detrimental to economic growth, suggesting that stabilization policies to mitigate short-run economic fluctuations contribute to long-run economic growth. And economic growth accelerates output variability, supporting the feedback effects from growth to the volatility. The evidence is robust to a number of sensitivity tests.
Original language | English |
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Pages (from-to) | 43-63 |
Number of pages | 21 |
Journal | Empirical Economics |
Volume | 46 |
Issue number | 1 |
DOIs | |
Publication status | Published - 2013 Mar 2 |
Bibliographical note
Funding Information:The authors are grateful to R. Rigobon for kindly making available computer code. Financial support (NSC 97-2410-H-032-003) from the National Science Council of Taiwan is herewith gratefully acknowledged. The usual disclaimer applies.
Publisher Copyright:
© Springer-Verlag Berlin Heidelberg 2013.
Keywords
- Economic growth
- Growth volatility
- Identification through heteroskedasticity
- Simultaneous equations models
ASJC Scopus subject areas
- Statistics and Probability
- Mathematics (miscellaneous)
- Social Sciences (miscellaneous)
- Economics and Econometrics