On the Non-Causal Link between Volatility and Growth

Olaf Posch () and Klaus Wälde
Additional contact information
Olaf Posch: School of Economics amd Management, Ahrhus University, Denmark

No 1002, Working Papers from Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz

Abstract: A model highlighting the endogeneity of both volatility and growth is presented. Volatility and growth are therefore correlated but there is no causal link from volatility to growth. This joint endogeneity is illustrated by working out the e ects through which economies with di erent tax levels di er both in their volatility and growth. Using a continuous-time dynamic stochastic general equilibrium (DSGE) model with plausible parametric restrictions, we obtain closed-form measures of macro volatility based on cyclical components and output growth rates. Given our results, empirical volatility-growth analysis should include controls in the conditional variance equation. Otherwise an omitted variable bias is likely.

Keywords: Tax effects; Volatility measures; Poisson uncertainty; Endogenous cycles and growth; Continuous-time DSGE models (search for similar items in EconPapers)
JEL-codes: C65 E32 E62 H3 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2010-03-08, Revised 2010-03-08
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://download.uni-mainz.de/RePEc/pdf/Discussion_Paper_1002.pdf First version, 2010 (application/pdf)

Related works:
Working Paper: On the non-causal link between volatility and growth (2009)
Working Paper: On the non-causal link between volatility and growth (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jgu:wpaper:1002

Access Statistics for this paper

More papers in Working Papers from Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz Contact information at EDIRC.
Bibliographic data for series maintained by Research Unit IPP ().