MEDIUM-TERM MACROECONOMIC VOLATILITY AND ECONOMIC DEVELOPMENT: A NEW TECHNIQUE

Sam Tang
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Sam Tang: Business School, University of Western Australia

No 15-29, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: A key question in development economics is why developing countries as a group experience so much growth volatility. This paper introduces a new technique to measure medium-term macroeconomic volatility that is defined by the trend-growth volatility of output. It shows that medium-term volatility, can be derived by subtracting the average short-term volatility from the total variations of output growth, Applying the new measure to the World Bank’s output data reveals an inverted-U shaped relationship between medium-term volatility and economic development, indicating that economic development is likely to increase trend-growth volatility for developing countries.

Pages: 21 pages
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:uwa:wpaper:15-29

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