The impact of volatility on economic growth

Abstract

This paper investigates the impact of macroeconomic volatility on growth in a panel of 121 countries over the period 1980 to 2010. We confirm the Ramey and Ramey (1995) result that macroeconomic volatility is negatively related to economic growth using a different empirical methodology and a newer dataset. Among the issues that await further work are the interaction of financial development and volatility, potential non-linearities of the impact of macroeconomic volatility on growth, and issues related to the endogeneity of growth and volatility in the context of empirical growth regression models