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Gross domestic product growth, volatility and regime changes nexus: the case of Portugal

Author

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  • Jorge M. Andraz

    (Universidade do Algarve
    Universidade de Évora
    University of Algarve)

  • Nélia M. Norte

    (Universidade do Algarve
    Universidade de Évora)

Abstract

This paper provides evidence of the behavior of GDP growth volatility in Portugal over the period from 1961 to 2016 with the main objective of measuring the degree of asymmetry of GDP growth rates volatility across the business cycles and its persistence over time. The methodological setting benefits from the most recent developments that recommend the consideration of structural changes in both the mean and variance and asymmetric reactions of volatility to positive and negative shocks. The results document structural changes and significant reductions of GDP growth rates volatility consistent with the “Great Moderation” phenomenon and reveal that the impact of negative shocks on volatility exceeds that of positive shocks more than 4 times over the sample period. Moreover, these asymmetries follow a rather stable pattern over the sample period, suggesting that the Portuguese economy has not been able to reduce its growth vulnerability to cyclical fluctuations.

Suggested Citation

  • Jorge M. Andraz & Nélia M. Norte, 2017. "Gross domestic product growth, volatility and regime changes nexus: the case of Portugal," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 16(1), pages 1-16, April.
    • Handle: RePEc:spr:portec:v:16:y:2017:i:1:d:10.1007_s10258-017-0128-y
    DOI: 10.1007/s10258-017-0128-y
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    More about this item

    Keywords

    GDP; Volatility; Structural change; GARCH; Portugal;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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