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The deep historical roots of macroeconomic volatility

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  • Charles Ka Yui Leung
  • Sam Hak Kan Tang

Abstract

We present cross-country evidence that a country?s macroeconomic volatility, measured either by the standard deviation of output growth or the occurrence of trend-growth breaks, is significantly affected by the country?s historical variables. In particular, countries with longer histories of state-level political institutions experience less macroeconomic volatility in post-war periods. Robustness checks reveal that the effect of this historical variable on volatility remains significant and substantial after controlling for a host of structural variables investigated in previous studies. We also find that the state history variable is more important in countries with a higher level of macroeconomic volatility.

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  • Charles Ka Yui Leung & Sam Hak Kan Tang, 2016. "The deep historical roots of macroeconomic volatility," Globalization Institute Working Papers 271, Federal Reserve Bank of Dallas.
  • Handle: RePEc:fip:feddgw:271
    DOI: 10.24149/gwp271
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