Risk, Volatility, and the Global Cross-Section of Growth Rates

Alexandra Tabova and Craig Burnside

No 10-42, Working Papers from Duke University, Department of Economics

Abstract: We reconsider the empirical links between volatility and growth between 1970 and 2007. There is a strong and significant correlation between individual country growth rates and global factors that are arguably exogenous with respect to their economies. The amount of volatility driven by these external factors is highly correlated, cross-sectionally, with the overall amount of volatility in GDP growth. There is also a strong correlation between a country's average growth rate and the magnitude and sign of its exposure to global factors. We interpret our findings as a partial answer to the question "Why doesn't capital flow from rich to poor countries?" We argue that low-income countries that grow slowly are riskier from the perspective of the marginal international investor.

Keywords: Volatility; Growt; Growth Rate; Capital Flow; Low-Income Countries; Growth Discrepancies (search for similar items in EconPapers)
JEL-codes: E32 E44 F21 F43 O40 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Risk, Volatility, and the Global Cross-Section of Growth Rates (2010)
Working Paper: Risk, Volatility, and the Global Cross-Section of Growth Rates (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:duk:dukeec:10-42

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