Growth and Volatility Reconsidered: Reconciling Opposite Views

Table 13

Dependent variable: growth rate of per capita GDP. Regressors: lagged growth rate of per capita GDP, volatility of GDP growth, consumption growth, investment growth, government consumption growth, and control variables. Sample: OECD countries (21 countries). Horizon: 1978–2007. Annual observations. All regressions include year dummies. All regressions are population weighted.

Dynamic models weighted estimations—restricted sample
Estimation	LSDV	LSDV	LSDV	LSDV	LSDV	LSDV-IV
				IV 2sls	IV 2sls	IV 2sls
GDP volatility	0.197*		0.511**	0.006		0.584**
	(1.78)		(2.40)	(0.04)		(2.40)
Consumption volatility		−0.825***	−0.889***		−0.731***	−0.800***
		(−5.61)	(−5.97)		(−4.46)	(−4.84)
Investment volatility		0.094***	−0.026		0.019	−0.113*
		(2.95)	(−0.44)		(0.53)	(−1.69)
Government consumption volatility		−0.052	−0.070		−0.124	−0.159
		(−0.47)	(−0.63)		(−0.96)	(−1.23)
GDP growth (𝑡−1)	0.331***	0.272***	0.267***	0.497***	0.457***	0.445***
	(7.95)	(6.43)	(6.34)	(10.16)	(9.14)	(8.96)
Education	0.001	0.003	0.003	0.002	0.005	0.004
	(0.21)	(0.86)	(0.87)	(0.55)	(1.04)	(0.90)
Population growth	0.104	0.161	0.187	0.58	0.525	0.549
	(0.29)	(0.46)	(0.54)	(1.42)	(1.30)	(1.36)
Initial GDP	−0.025**	−0.017*	−0.146	−0.021*	−0.013	−0.011
	(−2.51)	(−1.73)	(−1.50)	(−1.89)	(−1.22)	(−0.95)
Investment share of GDP	0.049***	0.053***	0.052***	−0.063***	−0.064***	−0.063***
	(4.66)	(5.12)	(5.05)	(−4.17)	(−4.23)	(−4.20)
Observations	609	609	609	567	567	567
Country dummies	yes	yes	yes	yes	yes	yes
Instruments	no	no	no	yes	yes	yes
Hansen 𝐽/Sargan test (𝑃 value)				0.178	0.196	0.200
Kleibergen-Paap Wald 𝐹 statistic				348.850	344.011	346.559

Note: 𝑇-statistics in parenthesis, robust SEs. *Significance at 10%, **significance at 5%, and ***significance at 1%.