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Robust Multiple Regimes in Growth Volatility

  • Andros Kourtellos

    ()

    (Department of Economics, University of Cyprus, Cyprus; The Rimini Centre for Economic Analysis (RCEA), Italy)

  • Ioanna Stylianou

    ()

    (Department of Economics, University of Cyprus, Cyprus)

  • Chih Ming Tan

    ()

    (Department of Economics, University of North Dakota, USA; The Rimini Centre for Economic Analysis (RCEA), Italy)

In this paper we uncover growth volatility regimes and identify their robust determinants using a large international panel of countries. In doing so we propose a novel empirical methodology that allows us to simultaneously deal with two key elements of model uncertainty, namely theory uncertainty and parameter heterogeneity, by unifying two recent econometric techniques: Bayesian Model Averaging and Threshold Regression. We find ample evidence of parameter heterogeneity and model uncertainty. Our results highlight the role of Macroeconomic Policy, Institutional variables, and Neoclassical growth variables in generating multiple volatility regimes.

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Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 52_13.

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Date of creation: Aug 2013
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Handle: RePEc:rim:rimwps:52_13
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