This paper presents empirical evidence against the standard dichotomy in macroeconomics that separates growth from the volatility of economic fluctuations. In a sample of 92 countries as well as a sample of OECD countries, we find that countries with higher volatility have lower growth. The addition of standard control variables strengthens the negative relationship. We also find that government spending-induced volatility is negatively associated with growth even after controlling for both time- and country-fixed effects.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
4959.
Length: Date of creation: Dec 1994 Date of revision: Publication status: published as American Economic Review, 85 (December 1995): 1138-1151 Handle: RePEc:nbr:nberwo:4959
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Find related papers by JEL classification: E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
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