Cross-Country Evidence on the Link Between Volatility and Growth

   (292 K)

This paper presents empirical evidence against the standard dichotomy in macroeconomics that separates growth from the volatility of economic fluctuations. In a sample of 92 countries as well as a sample of OECD countries, we find that countries with higher volatility have lower growth. The addition of standard control variables strengthens the negative relationship. We also find that government spending-induced volatility is negatively associated with growth even after controlling for both time- and country-fixed effects.

Published: American Economic Review, 85 (December 1995): 1138-1151

This paper is available as PDF (292 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX