The relationship between economic growth and real uncertainty in the G3

Fountas, Stilianos; Karanasos, Menelaos

doi:10.1016/j.econmod.2006.03.002

Cited by 53 publications

(69 citation statements)

References 21 publications

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“…The insignificant estimate of λ in the mean equation implies no relationship between output volatility and its growth in Japan, the U.K., and the U.S. This result conforms to the misperceptions hypothesis and the previous empirical findings, using GARCH-M models, of Grier and Perry (2000) and Fountas and Karanasos (2006) for the U.S. and Speight (1999) for the U.K. This finding, however, proves inconsistent with the discovery of a positive relationship by McKiernan (1996, 1998) for the U.K. and the U.S., and by Fountas and Karanasos (2006) for Japan, as well as the discovery of a negative relationship by Henry and Olekaln (2002) for the U.S.…”

Section: Output Growth Volatility and Output Growthsupporting

confidence: 79%

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Cross-Country Evidence on Output Growth Volatility: Nonstationary Variance and Garch Models

2007

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This paper revisits the issue of conditional volatility in real GDP growth rates for Canada, Japan, the United Kingdom, and the United States. Previous studies find high persistence in the volatility. This paper shows that this finding largely reflects a nonstationary variance. Output growth in the four countries became noticeably less volatile over the past few decades. In this paper, we employ the modified ICSS algorithm to detect structural change in the unconditional variance of output growth. One structural break exists in each of the four countries. We then use generalized autoregressive conditional heteroskedasticity (GARCH) specifications modeling output growth and its volatility with and without the break in volatility. The evidence shows that the time-varying variance falls sharply in Canada, Japan, and the U.K. and disappears in the U.S., excess kurtosis vanishes in Canada, Japan, and the U.S. and drops substantially in the U.K., once we incorporate the break in the variance equation of output for the four countries. That is, the integrated GARCH (IGARCH) effect proves spurious and the GARCH model demonstrates misspecification, if researchers neglect a nonstationary unconditional variance.Journal of Economic Literature Classification: C32; E32; O40

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Section: Output Growth Volatility and Output Growthsupporting

confidence: 79%

“…For the differences with other studies, Caporale and McKiernan (1998) and Fountas and Karanasos (2006) use annual real GNP or IP (industrial production) data. Caporale and McKiernan (1996), Speight (1999), and Grier and Perry (2000) use monthly IP to examine the effect of output volatility on its growth.…”

Section: Output Growth Volatility and Output Growthmentioning

confidence: 99%

Cross-Country Evidence on Output Growth Volatility: Nonstationary Variance and Garch Models

2007

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“…A well-developed financial sector is an important factor for reducing negative effects of policy uncertainties on economic growth. Fountas and Karanasos (2006) study the relationship between economic growth and real uncertainty for the G3 (Germany, Japan, and USA) by using a long time series annual data that cover about one and a half century. By employing GARCH model, they find that in two of three countries (Germany and Japan) uncertainty about output growth is positive determinant of growth.…”

Section: Review Of Literaturementioning

confidence: 99%

Effects of Macroeconomic Uncertainty on Investment and Economic Growth: Evidence from Pakistan

Fatima

Waheed

2011

Transit Stud Rev

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“…Labour market institutions, the technology of production, and the source of shocks are characteristics that increase the pace of knowledge accumulation, lowering economic growth (Blackburn, 1999;and Blackburn & Pelloni, 2004). Higher economic growth leads to higher inflation, in the short run, according to the Phillips curve approach (Fountas & Karanasos, 2006). The explanations for economic growth volatility point out that on the one hand, monetary shocks generate economic growth fluctuations around its natural rate that reflect price misperceptions.…”

Section: Volatility and Economic Growthmentioning

confidence: 99%

“…Bernanke (1983), Pindyck (1991), Ramey & Ramey (1995), Miller (1996), Rogers (1997 and2000), and Kneller & Young (2001); or 3) positivee.g. Mirman (1971), Kormendi & Meguire (1985), Black (1987), Grier & Tullock (1989), Bean (1990), Saint-Paul (1993), Blackburn, (1999, and Fountas & Karanasos (2006). A good survey on this relationship was undertaken by Fang & Miller (2008).…”

Section: Volatility and Economic Growthmentioning

confidence: 99%