Cross-Country Evidence on the Link between Volatility and Growth
28 Pages Posted: 4 Aug 2000 Last revised: 22 Jul 2022
Date Written: December 1994
Abstract
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.
Suggested Citation: Suggested Citation
Ramey, Garey and Ramey, Valerie A., Cross-Country Evidence on the Link between Volatility and Growth (December 1994). NBER Working Paper No. w4959, Available at SSRN: https://ssrn.com/abstract=226558
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