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Does Black’s Hypothesis for Output Variability Hold for Mexico?

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  • Macri, Joseph
  • Sinha, Dipendra

Abstract

Using two data series, namely GDP and the index of industrial production, we study the relationship between output variability and the growth rate of output. Ng-Perron unit root test shows that the growth rate of GDP is non-stationary but the growth rate of industrial output is stationary. Thus, we use the ARCH-M model for the monthly data of industrial output. A number of specifications (with and without a dummy variable) are used. In all cases, the results show that output variability has a negative but insignificant effect on the growth rate of output.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4021.

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Date of creation: Jul 2007
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Handle: RePEc:pra:mprapa:4021

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Keywords: economic growth; volatility; variability; business cycle fluctuations; GARCH models;

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  1. Pindyck, Robert, 1989. "Irreversibility, uncertainty, and investment," Policy Research Working Paper Series 294, The World Bank.
  2. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
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  4. Matthew Rafferty, 2005. "The Effects of Expected and Unexpected Volatility on Long-Run Growth: Evidence from 18 Developed Economies," Southern Economic Journal, Southern Economic Association, vol. 71(3), pages 582-591, January.
  5. Joseph Macri & Dipendra Sinha, 2000. "Output variability and economic growth: The case of Australia," Journal of Economics and Finance, Springer, vol. 24(3), pages 275-282, September.
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Cited by:
  1. Shahbaz, Muhammad & Afza, Talat & Shabbir, Shahbaz Muhammad, 2011. "Does defence spending impede economic growth? cointegration and causality analysis for Pakistan," MPRA Paper 30887, University Library of Munich, Germany, revised 27 Mar 2011.

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