Macroeconomic stability and economic growth: myths and realities

In this paper, we explore empirical relationships between sustained GDP growth and macroeconomic volatility, using World Economic Outlook data for the period 1980–2015, both in descriptive statistics and in fixed-effect panel regressions (IMF, 2016). The results debunk certain myths, such as those t...

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Autores principales:	Le Fort Varela, Guillermo, Gallardo, Bastián, Bustamante, Felipe
Formato:	Texto
Lenguaje:	English
Publicado:	2021
Acceso en línea:	http://hdl.handle.net/11362/46590
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spelling	oai-11362-465902021-02-24T14:53:01Z Macroeconomic stability and economic growth: myths and realities Le Fort Varela, Guillermo Gallardo, Bastián Bustamante, Felipe In this paper, we explore empirical relationships between sustained GDP growth and macroeconomic volatility, using World Economic Outlook data for the period 1980–2015, both in descriptive statistics and in fixed-effect panel regressions (IMF, 2016). The results debunk certain myths, such as those that maintain that more inflation generates more growth, that stabilization carries real costs, or that large inflows of foreign capital stimulate growth. We show that inflation has a tangible negative impact on growth and that there are “inflation thresholds”, beyond which that impact increases. Higher inflation is associated with greater nominal and real volatility, defined as cyclical output volatility. Furthermore, current account volatility contributes significantly to real volatility. Lastly, we show that real volatility has a negative impact on trend GDP growth and that macroeconomic volatility does not contribute to growth or well-being. 2021-01-18T19:21:11Z 2021-01-18T19:21:11Z 2020-08-31 Texto Sección o Parte de un Documento http://hdl.handle.net/11362/46590 LC/PUB.2020/9-P/Rev.1 6 en CEPAL Review CEPAL Review 131 .pdf application/pdf 1980 2015
institution	Cepal
collection	Cepal
language	English
description	In this paper, we explore empirical relationships between sustained GDP growth and macroeconomic volatility, using World Economic Outlook data for the period 1980–2015, both in descriptive statistics and in fixed-effect panel regressions (IMF, 2016). The results debunk certain myths, such as those that maintain that more inflation generates more growth, that stabilization carries real costs, or that large inflows of foreign capital stimulate growth. We show that inflation has a tangible negative impact on growth and that there are “inflation thresholds”, beyond which that impact increases. Higher inflation is associated with greater nominal and real volatility, defined as cyclical output volatility. Furthermore, current account volatility contributes significantly to real volatility. Lastly, we show that real volatility has a negative impact on trend GDP growth and that macroeconomic volatility does not contribute to growth or well-being.
format	Texto
author	Le Fort Varela, Guillermo Gallardo, Bastián Bustamante, Felipe
spellingShingle	Le Fort Varela, Guillermo Gallardo, Bastián Bustamante, Felipe Macroeconomic stability and economic growth: myths and realities
author_facet	Le Fort Varela, Guillermo Gallardo, Bastián Bustamante, Felipe
author_sort	Le Fort Varela, Guillermo
title	Macroeconomic stability and economic growth: myths and realities
title_short	Macroeconomic stability and economic growth: myths and realities
title_full	Macroeconomic stability and economic growth: myths and realities
title_fullStr	Macroeconomic stability and economic growth: myths and realities
title_full_unstemmed	Macroeconomic stability and economic growth: myths and realities
title_sort	macroeconomic stability and economic growth: myths and realities
publishDate	2021
url	http://hdl.handle.net/11362/46590
work_keys_str_mv	AT lefortvarelaguillermo macroeconomicstabilityandeconomicgrowthmythsandrealities AT gallardobastian macroeconomicstabilityandeconomicgrowthmythsandrealities AT bustamantefelipe macroeconomicstabilityandeconomicgrowthmythsandrealities
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Macroeconomic stability and economic growth: myths and realities

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