Medium-term macroeconomic volatility and economic development: a new technique

Research output: Contribution to journalArticle

Abstract

A key question in development economics is why developing countries as a collective group experience so much growth volatility. This paper introduces a new technique to measure medium-term macroeconomic volatility that is defined by the trend-growth volatility of output. It shows that medium-term volatility, (Formula presented.), can be derived by subtracting the average short-term volatility, (Formula presented.), from the total variance of output growth, (Formula presented.). Applying this new measure to the World Bank’s output data reveals an inverted-U shaped relationship between medium-term volatility and economic development, indicating that economic development is likely to increase trend-growth volatility for emerging low-income countries.

Original languageEnglish
Pages (from-to)1231-1249
Number of pages19
JournalEmpirical Economics
Volume56
Issue number4
Early online date20 Dec 2017
DOIs
Publication statusPublished - Apr 2019

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