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The growth-volatility relationship redux: What does volatility decomposition tell?

Version 2 2024-06-03, 14:54
Version 1 2018-06-26, 10:07
journal contribution
posted on 2024-06-03, 14:54 authored by Debdulal MallickDebdulal Mallick
AbstractThis paper revisits the empirical relationship between volatility and long-run growth, but the key contribution lies in decomposing growth volatility into its business-cycle and trend components. This volatility decomposition also accounts for enormous heterogeneity among countries in terms of their long-run growth trajectories. We identify a negative effect of trend volatility, which we refer to as long-run volatility, on growth, but no effect of business-cycle volatility. However, if long-run volatility is omitted, there would be a spurious (negative) effect of business-cycle volatility. Our results draw attention to a crucial question about different volatility measures and their implications in macroeconomic analyses.

History

Journal

B.E. Journal of Macroeconomics

Volume

19

Article number

ARTN 20180076

Location

Berlin, Germany

ISSN

1935-1690

eISSN

1935-1690

Language

English

Publication classification

C1 Refereed article in a scholarly journal, C Journal article

Copyright notice

2018, Walter de Gruyter GmbH, Berlin/Boston.

Issue

2

Publisher

WALTER DE GRUYTER GMBH