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An Index of Growth Rate Volatility: Methodology and an Application to European Regions

Author

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  • Irene Brunetti
  • Davide fiaschi
  • Lisa Gianmoena

Abstract

A novel methodology, inspired by the literature on mobility, based on Markov matrices, to measure growth rate volatility by a synthetic in- dex is proposed. An asymmetric version of the index allows to identify how much volatility can be ascribe to negative or positive fluctuations around trend. The application of the proposed methodology to a sample of 257 European regions shows that the economic size, their output compositions, their investment rates, the inflation rate and the domestic credit of countries to which they belong to are explanatory variables of growth rate volatility. On the contrary, no role for the participation to EMU is found. Construction sector and high flows of foreign direct investment favour large negative fluctuations

Suggested Citation

  • 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.
    • Handle: RePEc:pie:dsedps:2013/169
    Note: ISSN 2039-1854
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    References listed on IDEAS

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    More about this item

    Keywords

    Markov Matrix; Asymmetric Fluctuations; Output Com- position; Size Effect; Foreign Direct Investments.;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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