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Are Economic Growth and the Variability of the Business Cycle Related? Evidence from Five European Countries

  • Stilianos Fountas
  • Menelaos Karanasos

    ()

    (Department of Economics, National University of Ireland, Galway)

We use a long series of annual data that span over 100 years to examine the relationship between output growth and output growth uncertainty in five European countries. Using the GARCH methodology to proxy output growth uncertainty, we obtain two important results: First, more uncertainty about output growth leads to a higher rate of output growth in three of the five countries. Second, output growth reduces output growth uncertainty in all countries except one. Our results provide strong support to the view that macroeconomists should examine the theories of economic growth and the variability of the business cycle in tandem.

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Paper provided by National University of Ireland Galway, Department of Economics in its series Working Papers with number 0063.

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Date of creation: 2002
Date of revision: 2002
Handle: RePEc:nig:wpaper:0063
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