6533b85cfe1ef96bd12bd350

RESEARCH PRODUCT

An empirical analysis of growth volatility: A Markov chain approach

Andrea Mario LavezziDavide Fiaschi

subject

Stochastic volatilityMarkov chainMarkov transition matrixGross domestic productStructural changeNonparametric methodEconometricsEconomicsOpenness to experienceStructural changeGrowth rateVolatility (finance)Explanatory powerGrowth volatility

description

This paper studies the determinants of growth rate volatility, focusing on the effect of level of GDP, structural change and the size of economy. First we provide a graphical analysis based on nonparametric techniques, then a quantitative analysis which follows the distribution dynamics approach. Growth volatility appears to (i) decrease with per capita GDP, (ii) increase with the share of the agricultural sector on GDP and, (iii) decrease with the size of the economy, measured by a combination of total GDP and trade openness. However, we show that the explanatory power of per capita GDP tends to vanish when we control for the size of the economy. © 2005 Springer-Verlag Berlin Heidelberg.

yearjournalcountryeditionlanguage
2005-01-01
10.1007/3-540-28444-3_18http://hdl.handle.net/10447/31618