Last updated: September 2005
Volume 52, Special Issue
IMF Staff Papers

Growth and Volatility in an Era of Globalization

M. Ayhan Kose, Eswar S. Prasad, and Marco E. Terrones

Full Text of this Article (PDF 176K)

Abstract: We extend the analysis in Kose, Prasad, and Terrones (2005) to provide a comprehensive examination of the cross-sectional relationship between growth and macroeconomic volatility over the past four decades. We also document that while there has generally been a negative relationship between volatility and growth during this period, the nature of this relationship has been changing over time and across different country groups. In particular, we detect major shifts in this relationship after trade and financial liberalizations. In addition, our results show that volatility stemming from the main components of domestic demand is negatively associated with economic growth.
[JEL E32, F36, F43]