Advanced Search
MyIDEAS: Login

The Growth-Volatility Relationship: New Evidence Based on Stochastic Volatility in Mean Models

Contents:

Author Info

  • Lemoine, M.
  • Mougin, C.

Abstract

This paper models the relationship between growth and volatility for G7 economies in the time period 1960-2009. It delivers for the first time estimates of this relationship based on a logarithm variant of stochastic volatility in mean (SV-M) models. The relationship appears significantly positive in Germany and Italy, but insignificant in other countries. We also show that output volatility has increased in all countries since the beginning of the financial crisis, which illustrates the end of the great moderation. For comparison, the paper also delivers estimates based on a logarithm variant of GARCH in mean (log-GARCH-M) models, the class of time series models previously used in the literature to estimate the growth-volatility relationship. We show that SV-M models deliver results preferable to those of log-GARCH-M models, despite the high computational cost of their estimation. SV-M models fit generally better data than log-GARCH-M ones. As their residuals do not violate distribution assumptions, they do not deliver dubious conclusions concerning the significance of the relationship, which is the case of the log-GARCH-model for France, the UK and the US. Finally, SV-M models suggest a positive impact of unexpected volatility on output growth, which is not taken into account by log-GARCH-M models.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.banque-france.fr/uploads/tx_bdfdocumentstravail/DT285.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Banque de France in its series Working papers with number 285.

as in new window
Length: 21 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:bfr:banfra:285

Contact details of provider:
Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/
More information through EDIRC

Related research

Keywords: Growth; Volatility; Sequential Monte-Carlo Methods.;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Koliai, Lyes & Avouyi-Dovi, Sanvi & Ano Sujithan, Kuhanathan, 2014. "On the determinants of food price volatility," Economics Papers from University Paris Dauphine 123456789/12798, Paris Dauphine University.
  2. Mumtaz, Haroon & Theodoridis, Konstantinos, 2012. "The international transmission of volatility shocks: an empirical analysis," Bank of England working papers 463, Bank of England.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bfr:banfra:285. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-Christine Petit-Djemad).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.