Robust Multiple Regimes in Growth Volatility
35 Pages Posted: 2 Mar 2014 Last revised: 11 Feb 2015
Date Written: February 27, 2014
In this paper we uncover growth volatility regimes and identify their robust determinants using a large international panel of countries. In doing so we propose a novel empirical methodology that allows us to simultaneously deal with two key elements of model uncertainty, namely theory uncertainty and parameter heterogeneity, by unifying two recent econometric techniques: Bayesian Model Averaging and Threshold Regression. We find ample evidence of parameter heterogeneity and model uncertainty. Our results highlight the role of Ethnic Fractionalization, Institutions, Financial Development, Health, and Geography.
Keywords: growth volatility, multiple regimes, threshold regression
JEL Classification: C59, O40, Z12
Suggested Citation: Suggested Citation