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Are economic growth and the variability of the business cycle related? Evidence from five European countries

  • Stilianos Fountas
  • Menelaos Karanasos

We use a long series of annual data that span over 100 years to examine the relationship between output growth and its uncertainty in five European countries. Using the GARCH methodology to proxy uncertainty, we obtain two important results. First, more uncertainty about output leads to a higher rate of growth in three of the five countries. Second, output growth reduces its uncertainty in all countries except one. Our results are robust to alternative specifications and provide strong support to the recent emphasis by macroeconomists on the joint examination of economic growth and the variability of the business cycle.

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Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 22 (2008)
Issue (Month): 4 ()
Pages: 445-459

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Handle: RePEc:taf:intecj:v:22:y:2008:i:4:p:445-459
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