The determinants of macroeconomic volatility: A Bayesian model averaging approach

Leonidas Spiliopoulos

MPRA Paper from University Library of Munich, Germany

Abstract: Bayesian model averaging is applied to robustly ascertain the determinants of various output volatility measures, including the downside semideviation of growth rates. Financial sophis- tication variables are found to have qualitatively different effects on volatility. The ratio of govern- ment expenditure to GDP exhibited a significant positive relationship with volatility and the trade share of GDP was positively related for a balanced dataset of developed and developing countries between 1960-89, and negatively related for developing countries between 1974-89. Other significant determinants were the black market premium, civil liberties, political rights, rule of law, and ratios of short-term debt and taxation to GDP.

Keywords: Macroeconomic volatility; Growth; Government policy; Bayesian model averaging; Model selection (search for similar items in EconPapers)
JEL-codes: C11 E32 E60 F00 O47 (search for similar items in EconPapers)
Date: 2010-11-18
New Economics Papers: this item is included in nep-fdg
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Citations: View citations in EconPapers (2)

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