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Accounting for regional variance heterogeneity of growth

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  • Jeffrey Alan Edwards
  • Ronald Gilbert
  • Juan Sherwell

Abstract

This article explores heterogeneous behaviour in the conditional variance of growth. We find that regional effects account for a good part of this behaviour when modelled alone; however, regional effects themselves have no particular meaning. To this end, we try to empirically account for the regional effects using a large set of economic, political and demographic variables. Our results indicate that countries with past high levels of both investment and inflation cause growth to be less volatile today. Countries that have a greater number of changes in heads of government tend to experience lower growth volatility except in parliamentary democracies where the relationship reverses. The greater the number of effective parties the lower the volatility for all regime types. More strikes have no effect on volatility except for presidential democracies where volatility actually increases, while more open economies that share presidential and legislative powers also have more volatile growth rates.

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  • Jeffrey Alan Edwards & Ronald Gilbert & Juan Sherwell, 2010. "Accounting for regional variance heterogeneity of growth," Applied Economics, Taylor & Francis Journals, vol. 42(28), pages 3585-3596.
    • Handle: RePEc:taf:applec:v:42:y:2010:i:28:p:3585-3596
    DOI: 10.1080/00036840802260924
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    References listed on IDEAS

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    1. Spanos,Aris, 1999. "Probability Theory and Statistical Inference," Cambridge Books, Cambridge University Press, number 9780521424080.
    2. Garey Ramey & Valerie A. Ramey, 1991. "Technology Commitment and the Cost of Economic Fluctuations," NBER Working Papers 3755, National Bureau of Economic Research, Inc.
    3. Jeffrey Edwards & Benhua Yang, 2009. "An empirical refinement of the relationship between growth and volatility," Applied Economics, Taylor & Francis Journals, vol. 41(11), pages 1331-1343.
    4. Boris Pleskovic & Joseph E. Stiglitz, 2000. "Annual World Bank Conference on Development Economics 1999," World Bank Publications - Books, The World Bank Group, number 13839.
    5. Spanos,Aris, 1986. "Statistical Foundations of Econometric Modelling," Cambridge Books, Cambridge University Press, number 9780521269124, November.
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