Does growth affect volatility? An empirical study on developing countries

Masahiro Kodama

Applied Economics Letters, 2014, vol. 21, issue 4, 257-260

Abstract: Whereas economic growth and business cycles have received significant attention in the literature, they are typically examined separately. However, recent studies have found a causality in which short-term output volatility affects economic growth (volatility-growth causality). In contrast, in this study, we examine whether the opposite causality, from economic growth to short-term output volatility (growth-volatility causality), exists. The existence of volatility-growth causality does not necessarily exclude the existence of growth-volatility causality, and the two causalities may coexist. We empirically examine growth-volatility causality, and the results of our econometric analyses confirm its existence.

Date: 2014
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DOI: 10.1080/13504851.2013.854291

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