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Growth Volatility and the Structure of the Economy

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  • Davide Fiaschi
  • Andrea Mario Lavezzi

Abstract

The aim of the paper is twofold: i) to propose a methodology to compute the growth rate volatility of an economy, and ii) to investigate the relationship between growth volatility and economic development through the lenses of the structural characteristics of an economy. We study a large cross-section of countries in the period 1970-2009, controlling for the stability of the estimates in two subperiods: 1970:1989 (Period I) and 1990:2009 (Period II). Our main findings are: i) the degree of trade openness has a destabilizing effect, while the degree of financial openness has not a significant effect; ii) the size of the public sector displays a U-shaped relationship with growth volatility, but only in Period II; iii) the level of financial development has a negative effect on growth volatility, but only in Period I. Therefore, the dominant policy orientations in the recent decades contained emphasis on potential sources of instability, e.g. on the increase in openness and on the reduction of the size of the public sector.

Suggested Citation

  • Davide Fiaschi & Andrea Mario Lavezzi, 2011. "Growth Volatility and the Structure of the Economy," Discussion Papers 2011/117, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    • Handle: RePEc:pie:dsedps:2011/117
    Note: ISSN 2039-1854
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    File URL: https://www.ec.unipi.it/documents/Ricerca/papers/2011-117.pdf
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    References listed on IDEAS

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    Cited by:

    1. Davide fiaschi & Lisa Gianmoena & Angela Parenti, 2013. "The Determinants of Growth Rate Volatility in European Regions," Discussion Papers 2013/170, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    2. Davide fiaschi & Angela Parenti, 2013. "An Estimate of the Degree of Interconnectedness between European Regions: A Bayesian Model Averaging Approach," Discussion Papers 2013/171, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    3. Campi, Mercedes & Dueñas, Marco, 2020. "Volatility and economic growth in the twentieth century," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 330-343.
    4. Irene Brunetti & Davide fiaschi & Lisa Gianmoena, 2013. "An Index of Growth Rate Volatility: Methodology and an Application to European Regions," Discussion Papers 2013/169, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    5. Andros Kourtellos & Ioanna Stylianou & Chih Tan, 2015. "Robust multiple regimes in growth volatility," Empirical Economics, Springer, vol. 48(1), pages 461-491, February.
    6. Davide FIASCHI & Angela PARENTI, 2014. "How Reliable Are The Geographical Spatial Weights Matrices?," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 40, pages 53-68.
    7. Davide Fiaschi & Lisa Gianmoena & Angela Parenti, 2017. "Asymmetric macroeconomic volatility in European regions," Spatial Economic Analysis, Taylor & Francis Journals, vol. 12(2-3), pages 251-278, July.

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    More about this item

    Keywords

    growth volatility; economic development; economic structure; nonparametric methods.;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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