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On the Link between Volatility and Growth: A Spatial Econometrics Approach

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  • Girum Dagnachew Abate

Abstract

This paper examines the link between macro volatility and economic growth in the lens of spatial econometrics. We present an unconstrained spatial Durbin Ramey-Ramey model. We test the extended model in a panel of 78 countries to investigate all the possible dimensions along which spatial interactions can affect the link between macro volatility and growth. In contrast to previous literature, we split the effects of volatility on growth into direct and indirect effects using partial derivative impacts approach. We found that both the direct and indirect effects of volatility on growth are negative; the latter effect suggesting the transmission of volatility shocks to neighbouring countries. Growth rates observed in neighbouring countries has a positive effect on growth rate of a particular country.

Suggested Citation

  • Girum Dagnachew Abate, 2016. "On the Link between Volatility and Growth: A Spatial Econometrics Approach," Spatial Economic Analysis, Taylor & Francis Journals, vol. 11(1), pages 27-45, March.
    • Handle: RePEc:taf:specan:v:11:y:2016:i:1:p:27-45
    DOI: 10.1080/17421772.2015.1045021
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    1. Mª Luz García de la Vega & José A. Herce, "undated". "Integration and Growth in the EU. The Role of Trade," Working Papers 2000-20, FEDEA.
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    Cited by:

    1. Marbuah, George & Amuakwa-Mensah, Franklin, 2017. "Spatial analysis of emissions in Sweden," Energy Economics, Elsevier, vol. 68(C), pages 383-394.
    2. O'Connor, Sean & Doyle, Eleanor & Doran, Justin, 2018. "Diversity, employment growth and spatial spillovers amongst Irish regions," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 260-267.
    3. Xiurong Chen & Aimin Hao & Yali Li, 2020. "The impact of financial contagion on real economy-An empirical research based on combination of complex network technology and spatial econometrics model," PLOS ONE, Public Library of Science, vol. 15(3), pages 1-20, March.
    4. Mo, Guoli & Tan, Chunzhi & Zhang, Weiguo & Liu, Fang, 2019. "International portfolio of stock indices with spatiotemporal correlations: Can investors still benefit from portfolio, when and where?," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 168-183.

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