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The Great Moderation: Evidence from Five Asian Emerging Countries


  • WenShow Fang

    () (Department of Economics, Feng Chia University, Taiwan)

  • Jen-Ching Tseng

    (Department of Finance, Ling Tung University, Taiwan and Department of Statistics, Feng Chia University, Taiwan)

  • Shu-Ching Cheng

    (Department of Economics, Feng Chia University, Taiwan)


Most of the literature that investigates the Great Moderation of real gross domestic product (GDP) growth focuses on OECD developed countries, and few studies discuss emerging economies in Asia. By employing quarterly real GDP growth rates over the period 1960-2009 for China, Hong Kong, Korea, Singapore, and Taiwan, we find evidence of a structural change in GDP growth volatility for each of the five countries. The break date, however, differs among the countries. The Great Moderation emerges in China, Hong Kong, Korea, and Taiwan, while the growth volatility increases in Singapore. Using the autoregressive conditional heteroskedasticity in the mean (ARCH-M) model, we find that the volatility of output growth negatively affects output growth in China, Hong Kong and Singapore, and is only significant in Singapore. The volatility positively affects the growth rate in Korea and Taiwan, and is only significant in Taiwan. The policy implications are discussed. Finally, Taiwan experiences different relationships between economic growth volatility and growth in different volatility regimes.

Suggested Citation

  • WenShow Fang & Jen-Ching Tseng & Shu-Ching Cheng, 2011. "The Great Moderation: Evidence from Five Asian Emerging Countries," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 7(2), pages 227-256, July.
  • Handle: RePEc:jec:journl:v:7:y:2011:i:2:p:227-256

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    Cited by:

    1. Liu, De-Chih & Liu, Chih-Yun, 2016. "The source of stock return fluctuation in Taiwan," The Quarterly Review of Economics and Finance, Elsevier, vol. 61(C), pages 77-88.

    More about this item


    real GDP growth and volatility; the great moderation; outliers; structural changes in mean and variance; ARCH-M;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General


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