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How Robust is the Empirical Link between Business-Cycle Volatility and Long-Run Growth in OECD Countries?

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  • Jorg Dopke

Abstract

It has been argued that business-cycle volatility dampens growth. This paper argues that this is no stylised fact. A review of the literature reveals that arguments in favour of no, or even a positive, impact of business-cycle volatility on growth are as convincing as the arguments pointing in the other direction. Empirical evidence using annual data for 24 OECD countries from 1960 to 2000, based on robust cross-country regressions and panel models, raises doubts about a clear negative impact of volatility on growth. Moreover, the hypothesis of Granger-non-causality of business-cycle volatility for growth cannot be rejected.

Suggested Citation

  • Jorg Dopke, 2004. "How Robust is the Empirical Link between Business-Cycle Volatility and Long-Run Growth in OECD Countries?," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(1), pages 1-23.
  • Handle: RePEc:taf:irapec:v:18:y:2004:i:1:p:1-23
    DOI: 10.1080/0269217032000148672
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Lemmens, Aurélie & Croux, Christophe & Dekimpe, Marnik G., 2008. "Measuring and testing Granger causality over the spectrum: An application to European production expectation surveys," International Journal of Forecasting, Elsevier, vol. 24(3), pages 414-431.
    2. Nikolaos Antonakakis & Harald Badinger, 2012. "Output Volatility, Economic Growth, and Cross-Country Spillovers: New Evidence for the G7 Countries," FIW Working Paper series 098, FIW.
    3. Badinger, Harald, 2010. "Output volatility and economic growth," Economics Letters, Elsevier, vol. 106(1), pages 15-18, January.
    4. Mallick, Debdulal, 2014. "Financial Development, Shocks, And Growth Volatility," Macroeconomic Dynamics, Cambridge University Press, vol. 18(03), pages 651-688, April.
    5. Dimitrios Bakas & Georgios Chortareas & Georgios Magkonis, 2017. "Volatility and Growth: A not so straightforward relationship," Working Paper series 17-12, Rimini Centre for Economic Analysis.
    6. Jetter, Michael, 2014. "Volatility and growth: Governments are key," European Journal of Political Economy, Elsevier, vol. 36(C), pages 71-88.

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