Cross-Country Evidence on the Link between Volatility and Growth

28 Pages Posted: 4 Aug 2000 Last revised: 20 Jan 2022

See all articles by Garey Ramey

Garey Ramey

University of California, San Diego (UCSD) - Department of Economics

Valerie A. Ramey

University of California at San Diego; National Bureau of Economic Research (NBER)

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

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

Garey Ramey (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

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Valerie A. Ramey

University of California at San Diego ( email )

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United States
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National Bureau of Economic Research (NBER)

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