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What determines macroeconomic volatility? A cross-section and panel data study

  • Leonidas Spiliopoulos

    (University of Sydney)

This paper examines the determinants of the volatility in growth rates, seeking to expand on a very limited literature which has focused almost exclusively on financial determinants of volatility. An analysis of 41 variables and their effects on growth volatility yields some surprising results: the relationship between financial sophistication and volatility is not clearly positive as expounded in many studies, the oft cited negative relationship between real GDP per capita and volatility turns out to be positive, and there is no important relationship between inflation and volatility. The main policy implication for authorities is that intervention in most cases, whether in the form of trade and currency controls, or high government consumption, tends to exacerbate volatility.

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File URL: http://econwpa.repec.org/eps/mac/papers/0505/0505026.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 0505026.

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Length: 39 pages
Date of creation: 30 May 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0505026
Note: Type of Document - pdf; pages: 39
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Piketty, Thomas & Banerjee, Abhijit & Aghion, Philippe, 1997. "Dualism and macroeconomic volatility," CEPREMAP Working Papers (Couverture Orange) 9720, CEPREMAP.
  2. Xavier X. Sala-i-Martin, 1997. "I Just Ran Four Million Regressions," NBER Working Papers 6252, National Bureau of Economic Research, Inc.
  3. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-51, December.
  4. Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2004. "Growth Volatility and Financial Liberalization," NBER Working Papers 10560, National Bureau of Economic Research, Inc.
  5. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
  6. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
  7. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
  8. Thanasis Stengos & Theofanis P. Mamuneas & Pantelis Kalaitzidakis, 2002. "Specification and sensitivity analysis of cross-country growth regressions," Empirical Economics, Springer, vol. 27(4), pages 645-656.
  9. Denizer Cevdet A. & Iyigun Murat F. & Owen Ann, 2002. "Finance and Macroeconomic Volatility," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-32, October.
  10. Pantelis Kalaitzidakis & Theofanis P. Mamuneas & Thanasis Stengos, 2000. "A non-linear sensitivity analysis of cross-country growth regressions," Canadian Journal of Economics, Canadian Economics Association, vol. 33(3), pages 604-617, August.
  11. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 709-51, August.
  12. Joseph Macri & Dipendra Sinha, 2000. "Output variability and economic growth: The case of Australia," Journal of Economics and Finance, Springer, vol. 24(3), pages 275-282, September.
  13. Imbs, Jean, 2002. "Why the Link Between Volatility and Growth is Both Positive and Negative," CEPR Discussion Papers 3561, C.E.P.R. Discussion Papers.
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