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Have output growth rates stabilised? evidence from the g-7 economies

Author

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  • Terence C. Mills
  • Ping Wang

Abstract

In this paper we consider an extension of Hamilton's Markov chain model of output growth that allows for a one-time structural break in the hyperparameters. We fit this model to post-war quarterly output growth data from the G-7 economies and find evidence for such a structural break in each of them, although the break occurs at different times. The break is always associated with a decline in volatility and often with a narrowing of the mean growth differential between the expansionary and recessionary regimes. The results show that stabilisation has typically been achieved at the expense of a reduction in growth rates. Copyright (c) Scottish Economic Society 2003.

Suggested Citation

  • Terence C. Mills & Ping Wang, 2003. "Have output growth rates stabilised? evidence from the g-7 economies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(3), pages 232-246, August.
  • Handle: RePEc:bla:scotjp:v:50:y:2003:i:3:p:232-246
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    Cited by:

    1. Anthony Garratt & Gary Koop & ShaunP. Vahey, 2008. "Forecasting Substantial Data Revisions in the Presence of Model Uncertainty," Economic Journal, Royal Economic Society, vol. 118(530), pages 1128-1144, July.
    2. Ćorić, Bruno & Pugh, Geoff, 2013. "Foreign direct investment and output growth volatility: A worldwide analysis," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 260-271.
    3. Beatrice Simo-Kengne & Stephen Miller & Rangan Gupta & Mehmet Balcilar, 2016. "Evolution of the Monetary Transmission Mechanism in the US: the Role of Asset Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 52(3), pages 226-243, April.
    4. Beatrice D. Simo-Kengne & Stephen M. Miller & Rangan Gupta, 2013. "Evolution of Monetary Policy in the US: The Role of Asset Prices," Working Papers 201343, University of Pretoria, Department of Economics.
    5. de Boyrie Maria E, 2010. "Structural Changes, Causality, and Foreign Direct Investments: Evidence from the Asian Crises of 1997," Global Economy Journal, De Gruyter, vol. 9(4), pages 1-40, January.
    6. Fang, WenShwo & Miller, Stephen M., 2009. "Modeling the volatility of real GDP growth: The case of Japan revisited," Japan and the World Economy, Elsevier, vol. 21(3), pages 312-324, August.
    7. Mitra, Sinchan & Sinclair, Tara M., 2012. "Output Fluctuations In The G-7: An Unobserved Components Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 16(03), pages 396-422, June.
    8. Giorgio Canarella & WenShwo Fang & Stephen M. Miller & Stephen K. Pollard, 2008. "Is the Great Moderation Ending? UK and US Evidence," Working Papers 0801, University of Nevada, Las Vegas , Department of Economics.
    9. Amélie Charles & Olivier Darné & Laurent Ferrara, 2014. "Does the Great Recession imply the end of the Great Moderation? International evidence," EconomiX Working Papers 2014-21, University of Paris Nanterre, EconomiX.
    10. Christian Aßmann & Jens Hogrefe & Roman Liesenfeld, 2009. "The decline in German output volatility: a Bayesian analysis," Empirical Economics, Springer, vol. 37(3), pages 653-679, December.
    11. Herwartz, Helmut & Lütkepohl, Helmut, 2014. "Structural vector autoregressions with Markov switching: Combining conventional with statistical identification of shocks," Journal of Econometrics, Elsevier, vol. 183(1), pages 104-116.
    12. Jorge M. Andraz & Nelia M. Norte, 2013. "Output volatility in the OECD: Are the member states becoming less vulnerable to exogenous shocks?," Economic Issues Journal Articles, Economic Issues, vol. 18(2), pages 91-122, September.
    13. WenShwo Fang & Stephen M. Miller & ChunShen Lee, 2008. "Cross-Country Evidence On Output Growth Volatility: Nonstationary Variance And Garch Models," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(4), pages 509-541, September.
    14. Angang Hu & Jie Lu & Zhengyan Xiao, 2011. "Has China's Economy Become More Stable and Inertial? Nonlinear Investigations Based on Structural Break and Duration Dependent Regime Switching Models," Annals of Economics and Finance, Society for AEF, vol. 12(1), pages 157-181, May.
    15. repec:ipg:wpaper:2014-459 is not listed on IDEAS
    16. Andreas Brunhart, 2013. "Der Klein(st)staat Liechtenstein und seine grossen Nachbarländer: Eine wachstums- und konjunkturanalytische Gegenüberstellung," Arbeitspapiere 44, Liechtenstein-Institut.
    17. repec:bla:apacel:v:30:y:2016:i:2:p:3-32 is not listed on IDEAS
    18. Chauvet, Marcelle & Potter, Simon, 2013. "Forecasting Output," Handbook of Economic Forecasting, Elsevier.
    19. Peter M. Summers, 2005. "What caused the Great Moderation? : some cross-country evidence," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 5-32.
    20. WenShwo Fang & Stephen M. Miller, 2014. "Output Growth and its Volatility: The Gold Standard through the Great Moderation," Southern Economic Journal, Southern Economic Association, vol. 80(3), pages 728-751, January.
    21. Kocenda, Evzen, 2005. "Beware of breaks in exchange rates: Evidence from European transition countries," Economic Systems, Elsevier, vol. 29(3), pages 307-324, September.
    22. repec:spr:portec:v:16:y:2017:i:1:d:10.1007_s10258-017-0128-y is not listed on IDEAS
    23. Jie Lu & Angang Hu & Yilong Yan, 2012. "Nonlinear investigations of China's agricultural transformation based on the structural break regime switching model," China Agricultural Economic Review, Emerald Group Publishing, vol. 4(1), pages 52-68, January.

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