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On the Link Between the Volatility and Skewness of Growth

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  • 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.

Suggested Citation

  • Geert Bekaert & Alexander Popov, 2012. "On the Link Between the Volatility and Skewness of Growth," NBER Working Papers 18556, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:18556
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    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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