Volatility and Growth

Volatility and Growth

Author: Philippe Aghion

Publisher:

Published: 2005

Total Pages: 50

ISBN-13:

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We examine how credit constraints affect the cyclical behavior of productivity-enhancing investment and thereby volatility and growth. We first develop a simple growth model where firms engage in two types of investment: a short-term one and a long-term productivity-enhancing one. Because it takes longer to complete, long-term investment has a relatively less procyclical return but also a higher liquidity risk. Under complete financial markets, long-term investment is countercyclical, thus mitigating volatility. But when firms face tight credit constraints, long-term investment turns procyclical, thus amplifying volatility. Tighter credit therefore leads to both higher aggregate volatility and lower mean growth for a given total investment rate. We next confront the model with a panel of countries over the period 1960-2000 and find that a lower degree of financial development predicts a higher sensitivity of both the composition of investment and mean growth to exogenous shocks, as well as a stronger negative effect of volatility on growth. Keywords: Growth, fluctuations, business cycle, credit constraints, amplification, R & D. JEL Classifications: E22, E32, O16, O30, O41, O57.


Book Synopsis Volatility and Growth by : Philippe Aghion

Download or read book Volatility and Growth written by Philippe Aghion and published by . This book was released on 2005 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine how credit constraints affect the cyclical behavior of productivity-enhancing investment and thereby volatility and growth. We first develop a simple growth model where firms engage in two types of investment: a short-term one and a long-term productivity-enhancing one. Because it takes longer to complete, long-term investment has a relatively less procyclical return but also a higher liquidity risk. Under complete financial markets, long-term investment is countercyclical, thus mitigating volatility. But when firms face tight credit constraints, long-term investment turns procyclical, thus amplifying volatility. Tighter credit therefore leads to both higher aggregate volatility and lower mean growth for a given total investment rate. We next confront the model with a panel of countries over the period 1960-2000 and find that a lower degree of financial development predicts a higher sensitivity of both the composition of investment and mean growth to exogenous shocks, as well as a stronger negative effect of volatility on growth. Keywords: Growth, fluctuations, business cycle, credit constraints, amplification, R & D. JEL Classifications: E22, E32, O16, O30, O41, O57.

Volatility and Growth

Volatility and Growth

Author: Philippe Aghion

Publisher: Oxford University Press

Published: 2005-07-28

Total Pages: 159

ISBN-13: 0199248613

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An original work containing new theory and empirical analyses on the macropolicy of growth. Provides a new approach capable of generating relevant policy prescriptions. Written in an accessible style using simple models.


Book Synopsis Volatility and Growth by : Philippe Aghion

Download or read book Volatility and Growth written by Philippe Aghion and published by Oxford University Press. This book was released on 2005-07-28 with total page 159 pages. Available in PDF, EPUB and Kindle. Book excerpt: An original work containing new theory and empirical analyses on the macropolicy of growth. Provides a new approach capable of generating relevant policy prescriptions. Written in an accessible style using simple models.

Volatility and Growth

Volatility and Growth

Author: Viktoria Hnatkovska

Publisher: World Bank Publications

Published: 2004

Total Pages: 40

ISBN-13: 4020314225

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Book Synopsis Volatility and Growth by : Viktoria Hnatkovska

Download or read book Volatility and Growth written by Viktoria Hnatkovska and published by World Bank Publications. This book was released on 2004 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Volatility and Growth

Volatility and Growth

Author: Norman Loayza

Publisher:

Published: 2016

Total Pages: 40

ISBN-13:

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Hnatkovska and Loayza study the empirical, cross-country relationship between macroeconomic volatility and long-run economic growth. They address four central questions:- Does the volatility-growth link depend on country and policy characteristics, such as the level of development or trade openness?- Does this link reflect a statistically and economically significant causal effect from volatility to growth?- Has this relationship been stable over time and has it become stronger in recent decades?- Does the volatility-growth connection actually reveal the impact of crises rather than the overall effect of cyclical fluctuations?The authors find that macroeconomic volatility and long-run economic growth are indeed negatively related. This negative link is exacerbated in countries that are poor, institutionally underdeveloped, undergoing intermediate stages of financial development, or unable to conduct countercyclical fiscal policies. They find evidence that this negative relationship actually reflects the harmful effect from volatility to growth. Furthermore, the authors find that the negative effect of volatility on growth has become considerably larger in the past two decades and that it is mostly due to large recessions rather than normal cyclical fluctuations.This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to understand the effects of volatility.


Book Synopsis Volatility and Growth by : Norman Loayza

Download or read book Volatility and Growth written by Norman Loayza and published by . This book was released on 2016 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Hnatkovska and Loayza study the empirical, cross-country relationship between macroeconomic volatility and long-run economic growth. They address four central questions:- Does the volatility-growth link depend on country and policy characteristics, such as the level of development or trade openness?- Does this link reflect a statistically and economically significant causal effect from volatility to growth?- Has this relationship been stable over time and has it become stronger in recent decades?- Does the volatility-growth connection actually reveal the impact of crises rather than the overall effect of cyclical fluctuations?The authors find that macroeconomic volatility and long-run economic growth are indeed negatively related. This negative link is exacerbated in countries that are poor, institutionally underdeveloped, undergoing intermediate stages of financial development, or unable to conduct countercyclical fiscal policies. They find evidence that this negative relationship actually reflects the harmful effect from volatility to growth. Furthermore, the authors find that the negative effect of volatility on growth has become considerably larger in the past two decades and that it is mostly due to large recessions rather than normal cyclical fluctuations.This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to understand the effects of volatility.

Volatility and Growth

Volatility and Growth

Author: Philippe Aghion

Publisher:

Published: 2015

Total Pages: 0

ISBN-13:

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We examine how credit constraints affect the cyclical behavior of productivity-enhancing investment and thereby volatility and growth. We first develop a simple growth model where firms engage in two types of investment: a short-term one and a long-term productivity-enhancing one. Because it takes longer to complete, long-term investment has a relatively less procyclical return but also a higher liquidity risk. Under complete financial markets, long-term investment is countercyclical, thus mitigating volatility. But when firms face tight credit constraints, long-term investment turns procyclical, thus amplifying volatility. Tighter credit therefore leads to both higher aggregate volatility and lower mean growth for a given total investment rate. We next confront the model with a panel of countries over the period 1960-2000 and find that a lower degree of financial development predicts a higher sensitivity of both the composition of investment and mean growth to exogenous shocks, as well as a stronger negative effect of volatility on growth.


Book Synopsis Volatility and Growth by : Philippe Aghion

Download or read book Volatility and Growth written by Philippe Aghion and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine how credit constraints affect the cyclical behavior of productivity-enhancing investment and thereby volatility and growth. We first develop a simple growth model where firms engage in two types of investment: a short-term one and a long-term productivity-enhancing one. Because it takes longer to complete, long-term investment has a relatively less procyclical return but also a higher liquidity risk. Under complete financial markets, long-term investment is countercyclical, thus mitigating volatility. But when firms face tight credit constraints, long-term investment turns procyclical, thus amplifying volatility. Tighter credit therefore leads to both higher aggregate volatility and lower mean growth for a given total investment rate. We next confront the model with a panel of countries over the period 1960-2000 and find that a lower degree of financial development predicts a higher sensitivity of both the composition of investment and mean growth to exogenous shocks, as well as a stronger negative effect of volatility on growth.

Managing Economic Volatility and Crises

Managing Economic Volatility and Crises

Author: Joshua Aizenman

Publisher: Cambridge University Press

Published: 2005-10-03

Total Pages: 615

ISBN-13: 1139446940

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Economic volatility has come into its own after being treated for decades as a secondary phenomenon in the business cycle literature. This evolution has been driven by the recognition that non-linearities, long buried by the economist's penchant for linearity, magnify the negative effects of volatility on long-run growth and inequality, especially in poor countries. This collection organizes empirical and policy results for economists and development policy practitioners into four parts: basic features, including the impact of volatility on growth and poverty; commodity price volatility; the financial sector's dual role as an absorber and amplifier of shocks; and the management and prevention of macroeconomic crises. The latter section includes a cross-country study, case studies on Argentina and Russia, and lessons from the debt default episodes of the 1980s and 1990s.


Book Synopsis Managing Economic Volatility and Crises by : Joshua Aizenman

Download or read book Managing Economic Volatility and Crises written by Joshua Aizenman and published by Cambridge University Press. This book was released on 2005-10-03 with total page 615 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic volatility has come into its own after being treated for decades as a secondary phenomenon in the business cycle literature. This evolution has been driven by the recognition that non-linearities, long buried by the economist's penchant for linearity, magnify the negative effects of volatility on long-run growth and inequality, especially in poor countries. This collection organizes empirical and policy results for economists and development policy practitioners into four parts: basic features, including the impact of volatility on growth and poverty; commodity price volatility; the financial sector's dual role as an absorber and amplifier of shocks; and the management and prevention of macroeconomic crises. The latter section includes a cross-country study, case studies on Argentina and Russia, and lessons from the debt default episodes of the 1980s and 1990s.

Volatility and Growth in Latin America

Volatility and Growth in Latin America

Author: Rishi Goyal

Publisher: International Monetary Fund

Published: 2006-12-01

Total Pages: 54

ISBN-13: 1451865473

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This paper compares the pattern of macroeconomic volatility in 17 Latin American countries during episodes of high and low growth since 1970, examining in particular the role of policy volatility. Macroeconomic outcomes are distinguished from macroeconomic policies, structural reforms and reversals, shocks, and institutional constraints. Based on previous work, a composite measure of structural reforms is constructed for the 1970-2004 period. We find that outcomes and policies are more volatile in low growth episodes, while shocks (except U.S. interest rates) are similar across episodes. Fiscal policy volatility is associated with lower growth, but fiscal policy procyclicality is not. Low levels of market-oriented reforms and structural reform reversals are also associated with lower growth.


Book Synopsis Volatility and Growth in Latin America by : Rishi Goyal

Download or read book Volatility and Growth in Latin America written by Rishi Goyal and published by International Monetary Fund. This book was released on 2006-12-01 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper compares the pattern of macroeconomic volatility in 17 Latin American countries during episodes of high and low growth since 1970, examining in particular the role of policy volatility. Macroeconomic outcomes are distinguished from macroeconomic policies, structural reforms and reversals, shocks, and institutional constraints. Based on previous work, a composite measure of structural reforms is constructed for the 1970-2004 period. We find that outcomes and policies are more volatile in low growth episodes, while shocks (except U.S. interest rates) are similar across episodes. Fiscal policy volatility is associated with lower growth, but fiscal policy procyclicality is not. Low levels of market-oriented reforms and structural reform reversals are also associated with lower growth.

Volatility and Growth

Volatility and Growth

Author: Norman Loayza

Publisher:

Published: 2007

Total Pages: 184

ISBN-13:

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Book Synopsis Volatility and Growth by : Norman Loayza

Download or read book Volatility and Growth written by Norman Loayza and published by . This book was released on 2007 with total page 184 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Commodity Price Volatility and Inclusive Growth in Low-Income Countries

Commodity Price Volatility and Inclusive Growth in Low-Income Countries

Author: Mr.Rabah Arezki

Publisher: International Monetary Fund

Published: 2012-10-24

Total Pages: 408

ISBN-13: 1616353791

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In the years following the global financial crisis, many low-income countries experienced rapid recovery and strong economic growth. However, many are now facing enormous difficulties because of rapidly rising food and fuel prices, with the threat of millions of people being pushed into poverty around the globe. The risk of continued food price volatility is a systemic challenge, and a failure in one country has been shown to have a profound impact on entire regions. This volume addresses the challenges of commodity price volatility for low-income countries and explores some macroeconomic policy options for responding to commodity price shocks. The book then looks at inclusive growth policies to address inequality in commodity-exporting countries, particularly natural resource rich countries. Perspectives from the Middle East and North Africa, sub-Saharan Africa, emerging Asia, and Mexico are presented and, finally, the role of the international donor community is examined. This volume is a must read for policymakers everywhere, from those in advanced, donor countries to those in countries with the poorest and most vulnerable populations.


Book Synopsis Commodity Price Volatility and Inclusive Growth in Low-Income Countries by : Mr.Rabah Arezki

Download or read book Commodity Price Volatility and Inclusive Growth in Low-Income Countries written by Mr.Rabah Arezki and published by International Monetary Fund. This book was released on 2012-10-24 with total page 408 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the years following the global financial crisis, many low-income countries experienced rapid recovery and strong economic growth. However, many are now facing enormous difficulties because of rapidly rising food and fuel prices, with the threat of millions of people being pushed into poverty around the globe. The risk of continued food price volatility is a systemic challenge, and a failure in one country has been shown to have a profound impact on entire regions. This volume addresses the challenges of commodity price volatility for low-income countries and explores some macroeconomic policy options for responding to commodity price shocks. The book then looks at inclusive growth policies to address inequality in commodity-exporting countries, particularly natural resource rich countries. Perspectives from the Middle East and North Africa, sub-Saharan Africa, emerging Asia, and Mexico are presented and, finally, the role of the international donor community is examined. This volume is a must read for policymakers everywhere, from those in advanced, donor countries to those in countries with the poorest and most vulnerable populations.

Volatility and Growth

Volatility and Growth

Author:

Publisher:

Published: 2018

Total Pages:

ISBN-13:

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Book Synopsis Volatility and Growth by :

Download or read book Volatility and Growth written by and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: