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Does uncertainty affect economic growth? : an empirical analysis

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  • Lensink, Robert
  • Bo, Hong
  • Sterken, Elmer

    (Groningen University)

Abstract

This paper investigates the effect of uncertainty on economic growth. We construct measures of export uncertainty, government policy uncertainty and price uncertainty to augment a growth model, and using econometric techniques we test for robustness of the effects of these measure on economic growth in a cross-section of 138 developing and developed economies during 1970-1995. The result clearly shows a robust and negative effect of uncertainty on economic growth. These results underline the importance of export stability and policy credibility.

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File URL: http://irs.ub.rug.nl/ppn/183839269
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Bibliographic Info

Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 99E23.

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Date of creation: 1999
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Handle: RePEc:dgr:rugsom:99e23

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  1. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(3), pages 717-37, August.
  2. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 568, China Economics and Management Academy, Central University of Finance and Economics.
  3. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-83, May.
  4. Aizenman, Joshua & Marion, Nancy P. & Marion, Nancy P., 1993. "Macroeconomic uncertainty and private investment," Economics Letters, Elsevier, vol. 41(2), pages 207-210.
  5. Andrew B. Abel & Janice C. Eberly, . "A Unified Model of Investment Under Uncertainty," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 14-93, Wharton School Rodney L. White Center for Financial Research.
  6. Marga PEETERS, 2001. "Does Demand and Price Uncertainty affect Belgian and Spanish Corporate Investment?," Discussion Papers (REL - Recherches Economiques de Louvain) 2001031, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  7. Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence Across States and Regions," Papers, Yale - Economic Growth Center 629, Yale - Economic Growth Center.
  8. Ghosal, Vivek, 1995. "Input Choices under Price Uncertainty," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 33(1), pages 142-58, January.
  9. Nouriel Roubini & Xavier Sala-i-Martin, 1991. "Financial Repression and Economic Growth," NBER Working Papers 3876, National Bureau of Economic Research, Inc.
  10. Martin, Philippe & Rogers, Carol Ann, 1997. "Stabilization Policy, Learning-by-Doing, and Economic Growth," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 152-66, April.
  11. Xavier Sala-i-Martin, 1996. "Transfers, Social Safety Nets, and Economic Growth," IMF Working Papers 96/40, International Monetary Fund.
  12. Leahy, John V & Whited, Toni M, 1996. "The Effect of Uncertainty on Investment: Some Stylized Facts," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 28(1), pages 64-83, February.
  13. Aymo Brunetti & Beatrice Weder, 1998. "Investment and institutional uncertainty: A comparative study of different uncertainty measures," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 134(3), pages 513-533, September.
  14. Abigail Barr, 1995. "The missing factor: entrepreneurial networks, enterprises and economic growth in Ghana," CSAE Working Paper Series 1995-11, Centre for the Study of African Economies, University of Oxford.
  15. Abel, Andrew B, 1983. "Optimal Investment under Uncertainty," American Economic Review, American Economic Association, vol. 73(1), pages 228-33, March.
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  19. Bo, Hong & Sterken, Elmer, 2002. "Volatility of the interest rate, debt and firm investment: Dutch evidence," Journal of Corporate Finance, Elsevier, Elsevier, vol. 8(2), pages 179-193, March.
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Citations

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Cited by:
  1. Ivan Stoykov, 2012. "Bulgarian Economy in the Conditions of European Integration (Bulgarian)," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 3-20.
  2. Lensink, R., 2000. "Is there an uncertainty-laffer curve?," Research Report 00E12, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  3. Nikolaos Antonakakis & Harald Badinger, 2012. "Output Volatility, Economic Growth, and Cross-Country Spillovers: New Evidence for the G7 Countries," Department of Economics Working Papers wuwp141, Vienna University of Economics, Department of Economics.
  4. Artelaris, Panagiotis & Arvanitidis, Paschalis & Petrakos, George, 2007. "Explaining Knowledge-Based Economic Dynamism in a Global Scale," Papers, Economic and Social Research Institute (ESRI) DYNREG05, Economic and Social Research Institute (ESRI).
  5. Amber Fatima & Abdul Waheed, 2011. "Effects of Macroeconomic Uncertainty on Investment and Economic Growth: Evidence from Pakistan," Transition Studies Review, Springer, vol. 18(1), pages 112-123, September.
  6. Bisio, Laura & Ventura, Luigi, 2012. "Growth and volatility reconsidered: reconciling opposite views," MPRA Paper 35937, University Library of Munich, Germany.
  7. Galindev Ragchaasuren, 2005. "The Relationship between Growth and Volatility under Alternative Shocks," Economics Discussion Papers, University of Essex, Department of Economics 589, University of Essex, Department of Economics.
  8. Spiliopoulos, Leonidas, 2010. "The determinants of macroeconomic volatility: A Bayesian model averaging approach," MPRA Paper 26832, University Library of Munich, Germany.
  9. Ftiti, Zied, 2010. "The macroeconomic performance of the inflation targeting policy: An approach based on the evolutionary co-spectral analysis (extension for the case of a multivariate process)," Economic Modelling, Elsevier, vol. 27(1), pages 468-476, January.
  10. Maria Abreu & Henri L.F. de Groot & Raymond J.G.M. Florax, 2005. "A Meta-Analysis of Beta-Convergence: The Legendary Two-Percent," Tinbergen Institute Discussion Papers 05-001/3, Tinbergen Institute.
  11. repec:dgr:uvatin:2005001 is not listed on IDEAS
  12. Marian Rizov, 2002. "Budget Constraints and Profitability: Evidence from a Transition Economy," LICOS Discussion Papers, LICOS - Centre for Institutions and Economic Performance, KU Leuven 11602, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  13. Rossitsa Rangelova, 2009. "Changing Determinants of the Economic Growth – Theoretical Base and Specifics of the Empirics," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 3-32.
  14. Aiello, Francesco, 2002. "Financial stabilization systems, economic growth of developing countries and EU’s STABEX," MPRA Paper 38099, University Library of Munich, Germany.
  15. Jean-Louis Combes & Tahsin Saadi-Sedik, 2006. "How Does Trade Openness Influence Budget Deficits in Developing Countries?," IMF Working Papers 06/3, International Monetary Fund.
  16. Muhammad Azam & Muhammad Khan & Nasir Iqbal, 2012. "Impact of Political Risk and Uncertainty on FDI in South Asia," Transition Studies Review, Springer, vol. 19(1), pages 59-77, September.
  17. Bo, Hong, 2001. "Volatility of sales, expectation errors, and inventory investment: Firm level evidence," International Journal of Production Economics, Elsevier, Elsevier, vol. 72(3), pages 273-283, August.
  18. Artelaris, Panagiotis & Arvanitidis, Paschalis & Petrakos, George, 2006. "Theoretical and Methodological Study on Dynamic Growth Regions and Factors Explaining their Growth Performance," Papers, Economic and Social Research Institute (ESRI) DYNREG02, Economic and Social Research Institute (ESRI).
  19. Bernhard Felderer, 2001. "Warum unterscheiden sich die langfristigen Wachstums- und Produktivitätstrends Europas und der USA?," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 54(01), pages 15-23, 03.
  20. Ivan Stoykov, 2012. "Bulgarian Economy in the Conditions of European Integration (English)," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 21-36.
  21. Arvanitidis, Paschalis & Petrakos, George & Pavleas, Sotiris, 2007. "Determinants of economic growth: the experts’ view," Papers, Economic and Social Research Institute (ESRI) DYNREG20, Economic and Social Research Institute (ESRI).
  22. Gerald Stuber, 2001. "Implications of Uncertainty about Long-Run Inflation and the Price Level," Working Papers 01-16, Bank of Canada.

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