Cross-Country Evidence on the Link Between Volatility and Growth
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.
Document Object Identifier (DOI): 10.3386/w4959
Published: American Economic Review, 85 (December 1995): 1138-1151 citation courtesy of
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