CROSS-COUNTRY EVIDENCE ON THE LINK BETWEEN VOLATILITY AND GROWTH

This paper presents empirical evidence against the standard dichotomy in macroeconomics that separates growth from the volatility of-economi c fluctuations. In a sample of 92 countries as well as a sample of OEC D countries, we find that countries with higher volatility have lower growth. The addition of standard control variables strengthens the neg ative relationship. We also find that government spending-induced vola tility is negatively associated with growth even after controlling for both time- and country-fixed effects.