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How Robust is the Empirical Link between Business-Cycle Volatility and Long-Run Growth in OECD Countries?

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  • Jorg Dopke

Abstract

It has been argued that business-cycle volatility dampens growth. This paper argues that this is no stylised fact. A review of the literature reveals that arguments in favour of no, or even a positive, impact of business-cycle volatility on growth are as convincing as the arguments pointing in the other direction. Empirical evidence using annual data for 24 OECD countries from 1960 to 2000, based on robust cross-country regressions and panel models, raises doubts about a clear negative impact of volatility on growth. Moreover, the hypothesis of Granger-non-causality of business-cycle volatility for growth cannot be rejected.

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  • Jorg Dopke, 2004. "How Robust is the Empirical Link between Business-Cycle Volatility and Long-Run Growth in OECD Countries?," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(1), pages 1-23.
    • Handle: RePEc:taf:irapec:v:18:y:2004:i:1:p:1-23
    DOI: 10.1080/0269217032000148672
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    Cited by:

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    2. Paul Beaumont & Stefan Norrbin & F. Pinar Yigit, 2007. "Time series evidence on the linkage between the volatility and growth of output," Applied Economics Letters, Taylor & Francis Journals, vol. 15(1), pages 45-48.
    3. Lemmens, Aurélie & Croux, Christophe & Dekimpe, Marnik G., 2008. "Measuring and testing Granger causality over the spectrum: An application to European production expectation surveys," International Journal of Forecasting, Elsevier, vol. 24(3), pages 414-431.
    4. Eleftherios Goulas & Athina Zervoyianni, 2013. "Growth, Deficits and Uncertainty: Theoretical Aspects and Empirical Evidence," Working Paper series 53_13, Rimini Centre for Economic Analysis.
    5. Antonakakis, N. & Badinger, H., 2016. "Economic growth, volatility, and cross-country spillovers: New evidence for the G7 countries," Economic Modelling, Elsevier, vol. 52(PB), pages 352-365.
    6. Jetter, Michael, 2014. "Volatility and growth: Governments are key," European Journal of Political Economy, Elsevier, vol. 36(C), pages 71-88.
    7. Sam Tang, 2008. "Scientific Research and Growth Volatility," Economics Discussion / Working Papers 08-11, The University of Western Australia, Department of Economics.
    8. The Anh Pham, 2018. "Policy volatility and growth," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 17(2), pages 87-97, July.
    9. Nikolaos Antonakakis & Harald Badinger, 2012. "Output Volatility, Economic Growth, and Cross-Country Spillovers: New Evidence for the G7 Countries," Department of Economics Working Papers wuwp141, Vienna University of Economics and Business, Department of Economics.
    10. Badinger, Harald, 2010. "Output volatility and economic growth," Economics Letters, Elsevier, vol. 106(1), pages 15-18, January.
    11. Goulas, Eleftherios & Zervoyianni, Athina, 2013. "Growth, deficits and uncertainty: Theoretical aspects and empirical evidence from a panel of 27 countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(4), pages 380-392.
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