Volatility and Growth: An Explanation for the Disagreement
| dc.contributor.author | Jetter, Michael | |
| dc.coverage.spatial | Medellín de: Lat: 06 15 00 N degrees minutes Lat: 6.2500 decimal degrees Long: 075 36 00 W degrees minutes Long: -75.6000 decimal degrees | eng |
| dc.creator.email | mjetter7@gmail.com | spa |
| dc.creator.email | mjetter@eafit.edu.co | spa |
| dc.date.accessioned | 2013-07-11T21:28:03Z | |
| dc.date.available | 2013-07-11T21:28:03Z | |
| dc.date.issued | 2013-06-26 | |
| dc.description.abstract | This paper reconsiders the e_ects of volatile growth rates on growth itself. I show that the underlying endogeneity of government size can hide the net growth e_ects from volatility. There exists a positive direct and a negative indirect channel, with the latter operating through the size of the public sector. Risk-averse citizens respond to volatility either with precautionary savings (direct e_ect) or by demanding a stronger public safety net, which in turn lowers growth (indirect e_ect). However, the indirect channel is only available if the political regime allows citizens to determine their desired level of public services. I test this theory on a balanced panel of 95 countries from 1960 { 2010. The paper reveals the latent endogeneity of government size in a single growth equation framework and o_ers a simultaneous estimation method as an alternative. Results support the existence of both effects. The direct channel is stronger in autocratic societies, but as a country turns to democracy the indirect channel dominates. Volatility has a positive net e_ect on growth in autocratic nations, but a negative net effect in democratic societies. This finding explains why previous growth analyses of volatility at times reached contradicting conclusions. | eng |
| dc.identifier.jel | E32 | |
| dc.identifier.jel | H11 | |
| dc.identifier.jel | O40 | |
| dc.identifier.uri | http://hdl.handle.net/10784/995 | |
| dc.language.iso | eng | eng |
| dc.publisher | Universidad EAFIT | spa |
| dc.publisher.department | Escuela de Economía y Finanzas | spa |
| dc.rights.accessrights | info:eu-repo/semantics/openAccess | eng |
| dc.rights.local | Acceso abierto | spa |
| dc.subject.keyword | Volatility | eng |
| dc.subject.keyword | Business Cycles | eng |
| dc.subject.keyword | Economic Growth | eng |
| dc.title | Volatility and Growth: An Explanation for the Disagreement | eng |
| dc.type | workingPaper | eng |
| dc.type | info:eu-repo/semantics/workingPaper | eng |
| dc.type.hasVersion | draft | eng |
| dc.type.local | Documento de trabajo de investigación | spa |
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