What Determines Macroeconomic Volatility? A Cross-Section and Panel Data Study

39 Pages Posted: 3 Oct 2005

See all articles by Leonidas Spiliopoulos

Leonidas Spiliopoulos

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Human Development

Abstract

This paper examines the determinants of the volatility in growth rates, seeking to expand on a very limited literature which has focused almost exclusively on financial determinants of volatility. An analysis of 41 variables and their effects on growth volatility yields some surprising results: the relationship between financial sophistication and volatility is not clearly positive as expounded in many studies, the oft cited negative relationship between real GDP per capita and volatility turns out to be positive, and there is no important relationship between inflation and volatility. The main policy implication for authorities is that intervention in most cases, whether in the form of trade and currency controls, or high government consumption, tends to exacerbate volatility.

Keywords: Macroeconomics,volatility,economic growth,variability,international economics,public policy,uncertainty

JEL Classification: E3, E5, E6

Suggested Citation

Spiliopoulos, Leonidas, What Determines Macroeconomic Volatility? A Cross-Section and Panel Data Study. Available at SSRN: https://ssrn.com/abstract=812024 or http://dx.doi.org/10.2139/ssrn.812024

Leonidas Spiliopoulos (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Human Development ( email )

Lentzeallee 94
D-14195 Berlin
Germany

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