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Capital mobility and macroeconomic volatility: evidence from Greece

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  • Anastasios, Pappas

Abstract

This paper focuses on the impact of full capital account liberalization on macroeconomic volatility in Greece. According to the standard neoclassical model, such liberalization is to be desired because, among other advantages, it may reduce macroeconomic volatility. The link between macroeconomic volatility and capital account openness in the Greek economy is investigated by applying a simple three-month rolling standard deviation of real GDP growth and real final (total) consumption growth combined with more formal econometric methods such as Granger causality test and multivariate regressions. There is no strong evidence for a stable relation between macroeconomic volatility and variables of financial openness. Thus other factors, such as exchange rate volatility and exogenous shocks rather than a full liberalization of capital movements, seem to be related to macroeconomic growth volatility in the Greek economy.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29106.

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Date of creation: Jun 2010
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Publication status: Published in Journal of Economic Asymmetries 1.7(2010): pp. 101-121
Handle: RePEc:pra:mprapa:29106

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Related research

Keywords: Volatility; Capital mobility; Gross domestic product; Consumption; Growth;

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  1. Badinger, Harald, 2010. "Output volatility and economic growth," Economics Letters, Elsevier, vol. 106(1), pages 15-18, January.
  2. Eswar Prasad & Marco Terrones & M. Ayhan Kose, 2005. "How Do Trade and Financial Integration Affect the Relationship Between Growth and Volatility?," IMF Working Papers 05/19, International Monetary Fund.
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  9. Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian, 2006. "Growth volatility and financial liberalization," Journal of International Money and Finance, Elsevier, vol. 25(3), pages 370-403, April.
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  12. Pavlos Petroulas, 2007. "Short -Term Capital Flows and Growth in Developed and Emerging Markets," Working Papers 60, Bank of Greece.
  13. Michael D. Bordo & Claudia Goldin & Eugene N. White, 1998. "The Defining Moment: The Great Depression and the American Economy in the Twentieth Century," NBER Books, National Bureau of Economic Research, Inc, number bord98-1, October.
  14. Bernhard Fischer & Helmut Reisen, 1992. "Towards Capital Account Convertibility," OECD Development Centre Policy Briefs 4, OECD Publishing.
  15. Hnatkovska, Viktoria & Loayza, Norman, 2004. "Volatility and growth," Policy Research Working Paper Series 3184, The World Bank.
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