Is Volatility Good for Growth? Evidence from the G7

Elena Andreou, Alessandra Pelloni and Marianne Sensier (marianne.sensier@manchester.ac.uk)

Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester

Abstract: We provide empirical support for a DSGE model with nominal wage stickiness where growth is driven by learning-by-doing and money shocks and their variance are allowed to impact on long-run output growth. In our theoretical model the variance of monetary shocks has a negative effect on growth, while output volatility is good for growth as a positive relationship exists. Utilising a bivariate GARCH-M model we test the empirical conditional mean and variance relationships of nominal money and production growth rates in the G7 countries. We corroborate the theoretical model predictions with evidence from Bonferroni multiple tests across the G7.

Pages: 33 pages
Date: 2008
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Is Volatility Good for Growth? Evidence from the G7 (2013)
Working Paper: Is Volatility Good for Growth? Evidence from the G7 (2008)
Working Paper: Is Volatility Good for Growth? Evidence from the G7 (2008)
Working Paper: Is Volatility Good for Growth? Evidence from the G7 (2008)
Working Paper: Is volatility good for growth? Evidence from the G7 (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:man:cgbcrp:97

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