Growth and volatility correlate negatively across countries, but positively across sectors. Analytically, whether or not sectoral growth and volatility are correlated positively is irrelevant in the aggregate. Cross-country estimates identify the detrimental e¤ects of macroeconomic volatility on growth, but they cannot be used to dismiss theories implying a positive growth-volatility coefficient, which appear to hold in sectoral data. In particular, volatile sectors command high investment rates, as they would in a mean-variance framework.
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Find related papers by JEL classification: E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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Romain Ranciere & Aaron Tornell & Frank Westermann, 2005.
"Systemic Crises and Growth,"
NBER Working Papers
11076, National Bureau of Economic Research, Inc.
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Romain Rancière & Aaron Tornell & Frank Westermann, 2002.
"Systemic Crises and Growth,"
Economics Working Papers
854, Department of Economics and Business, Universitat Pompeu Fabra, revised Nov 2004.
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