An Index of Growth Rate Volatility: Methodology and an Application to European Regions

Irene Brunetti, Davide Fiaschi and Lisa Gianmoena

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: A novel methodology, inspired by the literature on mobility, based on Markov matrices, to measure growth rate volatility by a synthetic in- dex is proposed. An asymmetric version of the index allows to identify how much volatility can be ascribe to negative or positive fluctuations around trend. The application of the proposed methodology to a sample of 257 European regions shows that the economic size, their output compositions, their investment rates, the inflation rate and the domestic credit of countries to which they belong to are explanatory variables of growth rate volatility. On the contrary, no role for the participation to EMU is found. Construction sector and high flows of foreign direct investment favour large negative fluctuations

Keywords: Markov Matrix; Asymmetric Fluctuations; Output Com- position; Size Effect; Foreign Direct Investments. (search for similar items in EconPapers)
JEL-codes: C20 E32 O40 (search for similar items in EconPapers)
Date: 2013-10-01
New Economics Papers: this item is included in nep-mac
Note: ISSN 2039-1854
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Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2013/169

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