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A portfolio explanation of the relationship between macroeconomic volatility and economic growth


  • Mark A. Roberts


A number of studies have found a negative relationship between macroeconomic volatility and economic growth. We show this may be explained by a portfolio effect within a finite horizon model, where a safer asset, for example, public debt, is less productive than capital.

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  • Mark A. Roberts, "undated". "A portfolio explanation of the relationship between macroeconomic volatility and economic growth," Discussion Papers 11/14, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  • Handle: RePEc:not:notcfc:11/14

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    1. Neil Rankin & Barbara Roffia, 2003. "Maximum Sustainable Government Debt in the Overlapping Generations Model," Manchester School, University of Manchester, vol. 71(3), pages 217-241, June.
    2. Bean, Charles R., 1990. "Endogenous growth and the procyclical behaviour of productivity," European Economic Review, Elsevier, vol. 34(2-3), pages 355-363, May.
    3. A. Sandmo, 1970. "The Effect of Uncertainty on Saving Decisions," Review of Economic Studies, Oxford University Press, vol. 37(3), pages 353-360.
    4. Kneller, Richard & Young, Garry, 2001. "Business Cycle Volatility, Uncertainty and Long-Run Growth," Manchester School, University of Manchester, vol. 69(5), pages 534-552, Special I.
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