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The determinants of macroeconomic volatility: A Bayesian model averaging approach

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  • Spiliopoulos, Leonidas

Abstract

Bayesian model averaging is applied to robustly ascertain the determinants of various output volatility measures, including the downside semideviation of growth rates. Financial sophis- tication variables are found to have qualitatively different effects on volatility. The ratio of govern- ment expenditure to GDP exhibited a significant positive relationship with volatility and the trade share of GDP was positively related for a balanced dataset of developed and developing countries between 1960-89, and negatively related for developing countries between 1974-89. Other significant determinants were the black market premium, civil liberties, political rights, rule of law, and ratios of short-term debt and taxation to GDP.

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  • Spiliopoulos, Leonidas, 2010. "The determinants of macroeconomic volatility: A Bayesian model averaging approach," MPRA Paper 26832, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:26832
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    More about this item

    Keywords

    Macroeconomic volatility; Growth; Government policy; Bayesian model averaging; Model selection;
    All these keywords.

    JEL classification:

    • F00 - International Economics - - General - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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