Working Paper: NBER ID: w18556
Authors: Geert Bekaert; Alexander Popov
Abstract: In a sample of 110 countries over the period 1960-2009, we document a positive relation between the volatility and skewness of growth in the cross-section. The relation holds regardless of initial level of economic development and of subsequent long-run growth rate. We argue that this novel stylized fact is related to two distinct phenomena: sudden growth spurts in mostly emerging markets, and rare and abrupt crises in mostly developed economies. The former phenomenon is driven by industrialization, macroeconomic stabilization, and the exploitation of natural resources. The latter is consistent with recent theories of financial frictions. The positive relation between volatility and skewness in the cross-section is in sharp contrast with a negative relation between the two in panel data with country fixed effects which is fully driven by business cycle variation in rich countries.
Keywords: Growth; Volatility; Skewness; Economic Development
JEL Codes: E32; G10; O10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| volatility (E32) | skewness (C46) |
| high volatility (C58) | high skewness (C46) |
| low volatility (G19) | low skewness (C46) |
| sudden growth spurts in emerging markets (O53) | volatility and skewness relationship (C10) |
| crises in developed economies (G01) | volatility and skewness relationship (C10) |
| business cycle variations (E32) | negative correlation between volatility and skewness (C10) |