IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Volatility and regional growth in Europe: Does space matter?

  • Vicente Rios Ibáñez
  • Roberto Ezcurra
Registered author(s):

    This paper investigates the relationship between volatility and economic growth in the European regions over the period 1995-2008. To that end, we estimate a two way fi_x000C_xed e_x000B_ffects panel data model using spatial econometric techniques that allow us to incorporate into the analysis the relevance of spatial e_x000B_ffects in the processes of regional growth in Europe. The results show the existence of a positive and statistically signi_x000C_cant relationship between the fluctuations of the business cycle and regional growth, which is mainly consequence of the spatial spillovers induced by the incidence of volatility in neighbouring regions. This fi_x000C_nding is robust to the inclusion in the analysis of different explanatory variables that may a_x000B_ffect regional growth such as the initial GDP per capita, the level of investment or industry mix. Furthermore, the results of the paper do not depend on the specifi_x000C_c measure of volatility used, or the spatial weights matrix employed to capture the degree of spatial interdependence between the sample regions. The observed relationship suggests that traditional stabilization policies that attempt to reduce the fluctuations of the business cycle may be harmful for economic growth in the European regions.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa13p133.

    in new window

    Date of creation: Nov 2013
    Date of revision:
    Handle: RePEc:wiw:wiwrsa:ersa13p133
    Contact details of provider: Postal: Welthandelsplatz 1, 1020 Vienna, Austria
    Web page:

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Joseph Dejuan & Simon Gurr, 2004. "On the link between volatility and growth: evidence from Canadian Provinces," Applied Economics Letters, Taylor & Francis Journals, vol. 11(5), pages 279-282.
    2. Caporale, Tony & McKiernan, Barbara, 1996. "The Relationship between Output Variability and Growth: Evidence from Post War UK Data," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(2), pages 229-36, May.
    3. BAUMONT, Catherine & ERTUR, Cem & LE GALLO, Julie, 2001. "A Spatial Econometric Analysis of Geographic Spillovers and Growth for European Regions, 1980-1995," LATEC - Document de travail - Economie (1991-2003) 2001-04, LATEC, Laboratoire d'Analyse et des Techniques EConomiques, CNRS UMR 5118, Université de Bourgogne.
    4. Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence Across States and Regions," Papers 629, Yale - Economic Growth Center.
    5. Beugelsdijk, S. & van Schaik, A.B.T.M., 2005. "Differences in social capital between 54 western European regions," Other publications TiSEM 78302d91-740f-4f22-9fe6-7, Tilburg University, School of Economics and Management.
    6. Luc Anselin, 2010. "Thirty years of spatial econometrics," Papers in Regional Science, Wiley Blackwell, vol. 89(1), pages 3-25, 03.
    7. Partha Chatterjee & Malik Shukayev, 2006. "Are Average Growth Rate and Volatility Related?," Working Papers 06-24, Bank of Canada.
    8. Crescenzi, Riccardo & Rodriguez-Pose, Andres, 2008. "Infrastructure endowment and investment as determinants of regional growth in the European Union," EIB Papers 8/2008, European Investment Bank, Economics Department.
    9. Ben S. Bernanke, 1980. "Irreversibility, Uncertainty, and Cyclical Investment," NBER Working Papers 0502, National Bureau of Economic Research, Inc.
    10. Dawson, John W. & Stephenson, E. Frank, 1997. "The link between volatility and growth: Evidence from the States," Economics Letters, Elsevier, vol. 55(3), pages 365-369, September.
    11. Sergio J. Rey & Mark V. Janikas, 2005. "Regional convergence, inequality, and space," Journal of Economic Geography, Oxford University Press, vol. 5(2), pages 155-176, April.
    12. Saint-Paul, Gilles, 1993. "Productivity growth and the structure of the business cycle," European Economic Review, Elsevier, vol. 37(4), pages 861-883, May.
    13. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
    14. Andrés Rodríguez-Pose & Montserrat Vilalta-Bufi, 2004. "Education, Migration, and Job Ssatisfaction: the Regional Returns of Human Capital in the EU," Bruges European Economic Research Papers 1, European Economic Studies Department, College of Europe.
    15. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
    16. Lee, Lung-fei & Yu, Jihai, 2010. "Estimation of spatial autoregressive panel data models with fixed effects," Journal of Econometrics, Elsevier, vol. 154(2), pages 165-185, February.
    17. Joshua Aizenman & Nancy Marion, 1991. "Policy Uncertainty, Persistence and Growth," NBER Working Papers 3848, National Bureau of Economic Research, Inc.
    18. Roberto Ezcurra, 2009. "Does Income Polarization Affect Economic Growth? The Case of the European Regions," Regional Studies, Taylor & Francis Journals, vol. 43(2), pages 267-285.
    19. Siddharth Chandra, 2003. "Regional Economy Size and the Growth-Instability Frontier: Evidence from Europe," Journal of Regional Science, Wiley Blackwell, vol. 43(1), pages 95-122.
    20. Jan Fagerberg & Bart Verspagen & Marjolein Cani�ls, 1997. "Technology, Growth and Unemployment across European Regions," Regional Studies, Taylor & Francis Journals, vol. 31(5), pages 457-466.
    21. Roberto Ezcurra & Pedro Pascual & Manuel Rapun, 2006. "Regional Specialization in the European Union," Regional Studies, Taylor & Francis Journals, vol. 40(6), pages 601-616.
    22. Riccardo Crescenzi, 2005. "Innovation and Regional Growth in the Enlarged Europe: The Role of Local Innovative Capabilities, Peripherality, and Education," Growth and Change, Wiley Blackwell, vol. 36(4), pages 471-507.
    23. Mirman, Leonard J, 1971. "Uncertainty and Optimal Consumption Decisions," Econometrica, Econometric Society, vol. 39(1), pages 179-85, January.
    24. Martin Falk & Franz Sinabell, 2009. "A spatial econometric analysis of the regional growth and volatility in Europe," Empirica, Springer, vol. 36(2), pages 193-207, May.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa13p133. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.