Risk, Volatility, and the Global Cross-Section of Growth Rates

Posted: 28 Apr 2010

See all articles by Alexandra Tabova

Alexandra Tabova

Board of Governors of the Federal Reserve System

A. Craig Burnside

Duke University - Department of Economics; University of Glasgow - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: April 23, 2010

Abstract

We reconsider the empirical links between volatility and growth between 1970 and 2007. There is a strong and significant correlation between individual country growth rates and global factors that are arguably exogenous with respect to their economies. The amount of volatility driven by these external factors is highly correlated, cross-sectionally, with the overall amount of volatility in GDP growth. There is also a strong correlation between a country's average growth rate and the magnitude and sign of its exposure to global factors. We interpret our findings as a partial answer to the question "Why doesn't capital flow from rich to poor countries?" We argue that low-income countries that grow slowly are riskier from the perspective of the marginal international investor.

Keywords: Volatility, Growt, Growth Rate, Capital Flow, Low-Income Countries, Growth Discrepancies

JEL Classification: E32, E44, F21, F43, O40

Suggested Citation

Tabova, Alexandra and Burnside, Craig, Risk, Volatility, and the Global Cross-Section of Growth Rates (April 23, 2010). Duke Department of Economics Research Paper No. 43. Available at SSRN: https://ssrn.com/abstract=1594889

Alexandra Tabova

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Craig Burnside (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

University of Glasgow - Department of Economics

Adam Smith Building
Glasgow, Scotland G12 8RT
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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