PRESENTATION DATE: Thursday, March 19, 2015
TOPIC: On the link between volatility and growth: A spatial econometrics approach
Abstract: Abate will present an unconstrained spatial Durbin Ramey-Ramey model to examine the link between macro volatility and economic growth in the lens of spatial econometrics. We test the extended model in a panel of 78 countries to investigate all the possible dimensions along which spatial interactions can affect the link between macro volatility and growth. In contrast to previous literature, we split the effects of volatility on growth into direct and indirect effects using partial derivative impacts approach. We found that both the direct and indirect effects of volatility on growth are negative; the latter effect suggesting the transmission of volatility shocks to neighboring countries. Growth rates observed in neighboring countries have a positive effect on growth rate of a particular country.