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Published in: Empirical Economics 2/2021

22-05-2020

Revisiting the link between output growth and volatility: panel GARCH analysis

Authors: Pinar Deniz, Thanasis Stengos, M. Ege Yazgan

Published in: Empirical Economics | Issue 2/2021

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Abstract

This paper explores the link between output growth and volatility using several macroeconomic variables for a panel of countries for the period of 1971–2014. Using an augmented panel GARCH-M model, we allow for the first time in the literature for independent variables to be part of the conditional equations. The paper is also novel in terms of encompassing an extensive number of countries and country groups. The relationship between output growth and volatility is observed to vary between different country groups. Empirical findings regarding the effect of exogeneous variables suggest that trade openness contributes to economic growth and institutional quality lowers economic volatility.

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Appendix
Available only for authorised users
Footnotes
1
Panel unit root test results are available on demand.
 
2
All countries in World Bank database having GDP growth rates available are included.
 
3
We assume common effects considering that the panel data consists of similar countries with respect to their development levels and geographical location. We also assume AR(1) process for the mean equations considering that the time frequency is annual and taking into account of the small time span.
 
4
RATS codes GARCHMV.PRG are used and revised according to our methodology.
 
5
Estimates are small and they may be economically insignificant.
 
8
See for example the results of Cermeño and Grier (2006).
 
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Metadata
Title
Revisiting the link between output growth and volatility: panel GARCH analysis
Authors
Pinar Deniz
Thanasis Stengos
M. Ege Yazgan
Publication date
22-05-2020
Publisher
Springer Berlin Heidelberg
Published in
Empirical Economics / Issue 2/2021
Print ISSN: 0377-7332
Electronic ISSN: 1435-8921
DOI
https://doi.org/10.1007/s00181-020-01878-4

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