The link between economic growth and growth volatility

Shu-Chin Lin and Dong-Hyeon Kim ()

Empirical Economics, 2014, vol. 46, issue 1, 43-63

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. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Economic growth; Growth volatility; Simultaneous equations models; Identification through heteroskedasticity; C33; N10; O50 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (14)

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DOI: 10.1007/s00181-013-0680-y

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