On the Link between the Volatility and Skewness of Growth
54 Pages Posted: 27 Oct 2012 Last revised: 28 Feb 2018
Date Written: November 18, 2015
In a sample of 110 countries over the period 1960–2009, we document a positive relation between the volatility and skewness of growth in the cross-section. This novel stylized fact is related to two distinct mechanisms: sudden growth spurts in emerging markets, and sharp financial crises-driven recessions in developed economies. The former phenomenon is driven by industrialization, macroeconomic stabilization, and the exploitation of natural resources. The latter is consistent with recent theories of financial frictions. The cross-sectional pattern contrasts with a negative relation between volatility and skewness in panel data with country fixed effects in the top quartile of countries in terms of beginning-of-period GDP per capita.
Keywords: Volatility, Skewness, Development, Financial Frictions, Growth Spurts, Business Cycles
JEL Classification: E32, G10, O10
Suggested Citation: Suggested Citation