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Exploring GDP growth volatility spillovers across countries

Salah Abosedra, Mahmoud Arayssi, Bernard Ben Sita and Crispin Mutshinda

Economic Modelling, 2020, vol. 89, issue C, 577-589

Abstract: This study takes a portfolio approach to investigate GDP growth volatility spillovers among 120 countries of the world during the 1960–2017 period. Based on the ratios of growth rate to standard deviation, we rank these countries in pools of high-, midsize-, and low-income growth. Using a spillover index that is based on variance decompositions under a vector autoregressive framework, we analyze the sources of growth volatility dynamics in the world in terms of volatility proportions from and to others. We find that high-income growth countries are net transmitters, while low-income growth countries are net recipients of growth volatility. We also find that it takes several years for low-income growth countries to absorb growth shocks of global nature. Overall, our analyses illustrate the importance of partnership in risk sharing as it is related to portfolio strategies and risk management.

Keywords: GDP growth; Growth volatility; Spillover; Vector autoregression; Variance decomposition (search for similar items in EconPapers)
JEL-codes: F43 G01 C32 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:89:y:2020:i:c:p:577-589

DOI: 10.1016/j.econmod.2019.11.015

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