Volatility and Growth

The authors study the empirical, cross-country relationship between macroeconomic volatility and long-run economic growth. They address four central questions: 1) Does the volatility-growth link depend on country and policy characteristics, such as...

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Main Authors:	Hnatkovska, Viktoria, Loayza, Norman
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2013
Subjects:	ACCOUNTING AVERAGE GROWTH AVERAGE GROWTH RATE AVERAGE INCOME BUSINESS CYCLE BUSINESS CYCLES CAPITAL INVESTMENT CAUSAL EFFECT CAUSAL IMPACT COUNTRY AVERAGES COUNTRY CHARACTERISTICS COUNTRY DATA DEPENDENT VARIABLE DEVELOPED COUNTRIES DEVELOPING COUNTRIES DEVELOPMENT COUNTRIES DOMESTIC CREDIT ECONOMIC CRISES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIES IN TRANSITION EMPIRICAL EVIDENCE EMPIRICAL GROWTH LITERATURE EMPIRICAL LITERATURE EMPIRICAL MODELS EMPIRICAL REGULARITIES EMPIRICAL RESULTS ERROR TERM ESTIMATION RESULTS EXCHANGE RATE MISALIGNMENT EXPLANATORY VARIABLES FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL MARKETS FINANCIAL SYSTEMS FISCAL CONSTRAINTS FISCAL POLICIES FISCAL POLICY GROWTH DETERMINANTS GROWTH EFFECT GROWTH LITERATURE GROWTH PERFORMANCE GROWTH PROCESS GROWTH RATE GROWTH RATES GROWTH REGRESSION GROWTH REGRESSIONS HIGH INCOME HUMAN CAPITAL INCOME LEVELS INFLATION INFLATION RATE INSTITUTIONAL WEAKNESSES INSURANCE INTERNATIONAL TRADE LONG-RUN GROWTH LONG-RUN IMPACT LOW-INCOME COUNTRIES MACROECONOMIC INSTABILITY MACROECONOMIC SHOCKS MACROECONOMIC STABILIZATION MEAN GROWTH NEGATIVE EFFECT NEGATIVE IMPACT 0 HYPOTHESIS OUTPUT OUTPUT GAP OUTPUT VOLATILITY PER CAPITA INCOME POOR COUNTRIES PURCHASING POWER REAL EXCHANGE RATE RECESSIONS RICH COUNTRIES RULE OF LAW SIGNIFICANT EFFECT STABILIZATION POLICIES STANDARD DEVIATION STANDARD GROWTH DETERMINANTS STRUCTURAL CHARACTERISTICS SYSTEMIC BANKING CRISES TERMS OF TRADE TRADE OPENNESS TRADE SHOCKS TRANSITIONAL CONVERGENCE
Online Access:	http://documents.worldbank.org/curated/en/2004/01/2877484/volatility-growth http://hdl.handle.net/10986/13853

id	okr-10986-13853
recordtype	oai_dc
spelling	okr-10986-138532021-04-23T14:03:20Z Volatility and Growth Hnatkovska, Viktoria Loayza, Norman ACCOUNTING AVERAGE GROWTH AVERAGE GROWTH RATE AVERAGE INCOME BUSINESS CYCLE BUSINESS CYCLES CAPITAL INVESTMENT CAUSAL EFFECT CAUSAL IMPACT COUNTRY AVERAGES COUNTRY CHARACTERISTICS COUNTRY DATA DEPENDENT VARIABLE DEVELOPED COUNTRIES DEVELOPING COUNTRIES DEVELOPMENT COUNTRIES DOMESTIC CREDIT ECONOMIC CRISES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIES IN TRANSITION EMPIRICAL EVIDENCE EMPIRICAL GROWTH LITERATURE EMPIRICAL LITERATURE EMPIRICAL MODELS EMPIRICAL REGULARITIES EMPIRICAL RESULTS ERROR TERM ESTIMATION RESULTS EXCHANGE RATE MISALIGNMENT EXPLANATORY VARIABLES FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL MARKETS FINANCIAL SYSTEMS FISCAL CONSTRAINTS FISCAL POLICIES FISCAL POLICY GROWTH DETERMINANTS GROWTH EFFECT GROWTH LITERATURE GROWTH PERFORMANCE GROWTH PROCESS GROWTH RATE GROWTH RATES GROWTH REGRESSION GROWTH REGRESSIONS HIGH INCOME HUMAN CAPITAL INCOME LEVELS INFLATION INFLATION RATE INSTITUTIONAL WEAKNESSES INSURANCE INTERNATIONAL TRADE LONG-RUN GROWTH LONG-RUN IMPACT LOW-INCOME COUNTRIES MACROECONOMIC INSTABILITY MACROECONOMIC SHOCKS MACROECONOMIC STABILIZATION MEAN GROWTH NEGATIVE EFFECT NEGATIVE IMPACT 0 HYPOTHESIS OUTPUT OUTPUT GAP OUTPUT VOLATILITY PER CAPITA INCOME POOR COUNTRIES PURCHASING POWER REAL EXCHANGE RATE RECESSIONS RICH COUNTRIES RULE OF LAW SIGNIFICANT EFFECT STABILIZATION POLICIES STANDARD DEVIATION STANDARD GROWTH DETERMINANTS STRUCTURAL CHARACTERISTICS SYSTEMIC BANKING CRISES TERMS OF TRADE TRADE OPENNESS TRADE SHOCKS TRANSITIONAL CONVERGENCE The authors study the empirical, cross-country relationship between macroeconomic volatility and long-run economic growth. They address four central questions: 1) Does the volatility-growth link depend on country and policy characteristics, such as the level of development or trade openness? 2) Does this link reflect a statistically and economically significant causal effect from volatility to growth? 3) Has this relationship been stable over time and has it become stronger in recent decades? 4) Does the volatility-growth connection actually reveal the impact of crises rather than the overall effect of cyclical fluctuations? The authors find that macroeconomic volatility, and long-run economic growth are indeed negatively related. This negative link is exacerbated in countries that are poor, institutionally underdeveloped, undergoing intermediate stages of financial development, or unable to conduct counter-cyclical fiscal policies. They find evidence that this negative relationship actually reflects the harmful effect from volatility to growth. Furthermore, the authors find that the negative effect of volatility on growth has become considerably larger in the past two decades, and that it is mostly due to large recessions rather than normal cyclical fluctuations. 2013-06-11T22:06:15Z 2013-06-11T22:06:15Z 2003-08 http://documents.worldbank.org/curated/en/2004/01/2877484/volatility-growth http://hdl.handle.net/10986/13853 English en_US Policy Research Working Paper;No. 3184 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ACCOUNTING AVERAGE GROWTH AVERAGE GROWTH RATE AVERAGE INCOME BUSINESS CYCLE BUSINESS CYCLES CAPITAL INVESTMENT CAUSAL EFFECT CAUSAL IMPACT COUNTRY AVERAGES COUNTRY CHARACTERISTICS COUNTRY DATA DEPENDENT VARIABLE DEVELOPED COUNTRIES DEVELOPING COUNTRIES DEVELOPMENT COUNTRIES DOMESTIC CREDIT ECONOMIC CRISES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIES IN TRANSITION EMPIRICAL EVIDENCE EMPIRICAL GROWTH LITERATURE EMPIRICAL LITERATURE EMPIRICAL MODELS EMPIRICAL REGULARITIES EMPIRICAL RESULTS ERROR TERM ESTIMATION RESULTS EXCHANGE RATE MISALIGNMENT EXPLANATORY VARIABLES FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL MARKETS FINANCIAL SYSTEMS FISCAL CONSTRAINTS FISCAL POLICIES FISCAL POLICY GROWTH DETERMINANTS GROWTH EFFECT GROWTH LITERATURE GROWTH PERFORMANCE GROWTH PROCESS GROWTH RATE GROWTH RATES GROWTH REGRESSION GROWTH REGRESSIONS HIGH INCOME HUMAN CAPITAL INCOME LEVELS INFLATION INFLATION RATE INSTITUTIONAL WEAKNESSES INSURANCE INTERNATIONAL TRADE LONG-RUN GROWTH LONG-RUN IMPACT LOW-INCOME COUNTRIES MACROECONOMIC INSTABILITY MACROECONOMIC SHOCKS MACROECONOMIC STABILIZATION MEAN GROWTH NEGATIVE EFFECT NEGATIVE IMPACT 0 HYPOTHESIS OUTPUT OUTPUT GAP OUTPUT VOLATILITY PER CAPITA INCOME POOR COUNTRIES PURCHASING POWER REAL EXCHANGE RATE RECESSIONS RICH COUNTRIES RULE OF LAW SIGNIFICANT EFFECT STABILIZATION POLICIES STANDARD DEVIATION STANDARD GROWTH DETERMINANTS STRUCTURAL CHARACTERISTICS SYSTEMIC BANKING CRISES TERMS OF TRADE TRADE OPENNESS TRADE SHOCKS TRANSITIONAL CONVERGENCE
spellingShingle	ACCOUNTING AVERAGE GROWTH AVERAGE GROWTH RATE AVERAGE INCOME BUSINESS CYCLE BUSINESS CYCLES CAPITAL INVESTMENT CAUSAL EFFECT CAUSAL IMPACT COUNTRY AVERAGES COUNTRY CHARACTERISTICS COUNTRY DATA DEPENDENT VARIABLE DEVELOPED COUNTRIES DEVELOPING COUNTRIES DEVELOPMENT COUNTRIES DOMESTIC CREDIT ECONOMIC CRISES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIES IN TRANSITION EMPIRICAL EVIDENCE EMPIRICAL GROWTH LITERATURE EMPIRICAL LITERATURE EMPIRICAL MODELS EMPIRICAL REGULARITIES EMPIRICAL RESULTS ERROR TERM ESTIMATION RESULTS EXCHANGE RATE MISALIGNMENT EXPLANATORY VARIABLES FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL MARKETS FINANCIAL SYSTEMS FISCAL CONSTRAINTS FISCAL POLICIES FISCAL POLICY GROWTH DETERMINANTS GROWTH EFFECT GROWTH LITERATURE GROWTH PERFORMANCE GROWTH PROCESS GROWTH RATE GROWTH RATES GROWTH REGRESSION GROWTH REGRESSIONS HIGH INCOME HUMAN CAPITAL INCOME LEVELS INFLATION INFLATION RATE INSTITUTIONAL WEAKNESSES INSURANCE INTERNATIONAL TRADE LONG-RUN GROWTH LONG-RUN IMPACT LOW-INCOME COUNTRIES MACROECONOMIC INSTABILITY MACROECONOMIC SHOCKS MACROECONOMIC STABILIZATION MEAN GROWTH NEGATIVE EFFECT NEGATIVE IMPACT 0 HYPOTHESIS OUTPUT OUTPUT GAP OUTPUT VOLATILITY PER CAPITA INCOME POOR COUNTRIES PURCHASING POWER REAL EXCHANGE RATE RECESSIONS RICH COUNTRIES RULE OF LAW SIGNIFICANT EFFECT STABILIZATION POLICIES STANDARD DEVIATION STANDARD GROWTH DETERMINANTS STRUCTURAL CHARACTERISTICS SYSTEMIC BANKING CRISES TERMS OF TRADE TRADE OPENNESS TRADE SHOCKS TRANSITIONAL CONVERGENCE Hnatkovska, Viktoria Loayza, Norman Volatility and Growth
relation	Policy Research Working Paper;No. 3184
description	The authors study the empirical, cross-country relationship between macroeconomic volatility and long-run economic growth. They address four central questions: 1) Does the volatility-growth link depend on country and policy characteristics, such as the level of development or trade openness? 2) Does this link reflect a statistically and economically significant causal effect from volatility to growth? 3) Has this relationship been stable over time and has it become stronger in recent decades? 4) Does the volatility-growth connection actually reveal the impact of crises rather than the overall effect of cyclical fluctuations? The authors find that macroeconomic volatility, and long-run economic growth are indeed negatively related. This negative link is exacerbated in countries that are poor, institutionally underdeveloped, undergoing intermediate stages of financial development, or unable to conduct counter-cyclical fiscal policies. They find evidence that this negative relationship actually reflects the harmful effect from volatility to growth. Furthermore, the authors find that the negative effect of volatility on growth has become considerably larger in the past two decades, and that it is mostly due to large recessions rather than normal cyclical fluctuations.
format	Publications & Research :: Policy Research Working Paper
author	Hnatkovska, Viktoria Loayza, Norman
author_facet	Hnatkovska, Viktoria Loayza, Norman
author_sort	Hnatkovska, Viktoria
title	Volatility and Growth
title_short	Volatility and Growth
title_full	Volatility and Growth
title_fullStr	Volatility and Growth
title_full_unstemmed	Volatility and Growth
title_sort	volatility and growth
publisher	World Bank, Washington, DC
publishDate	2013
url	http://documents.worldbank.org/curated/en/2004/01/2877484/volatility-growth http://hdl.handle.net/10986/13853
_version_	1764429856774291456

Volatility and Growth

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