Cross-Country Interactions, the Great Moderation and the Role of Output Volatility in Growth

Steven Trypsteen ()

No 2014/14, Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

Abstract: This paper investigates the effect of output volatility and the great moderation on growth in a model that simultaneously accounts for cross-country interactions, structural breaks and heterogeneous effects. This is done by augmenting the univariate GARCH-M model of growth for each G7 country with cross-country weighted averages of growth and shift dummies. I find that volatility affects growth positively, that there is a great moderation in five of the G7 countries and that the great moderation has a negative effect on growth in all G7 countries. A simulation exercise shows that cross-country interactions are important in estimating the volatility effect.

Keywords: Cross-country interactions; Volatility; Growth; GARCH-M; The great moderation. (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-gro and nep-opm
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http://www.nottingham.ac.uk/cfcm/documents/papers/cfcm-2014-14.pdf (application/pdf)

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Working Paper: Cross-Country Interactions, the Great Moderation and the Role of Output Volatility in Growth (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:not:notcfc:14/14

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