Robust multiple regimes in growth volatility

Kourtellos, Andros, Stylianou, Ioanna orcid iconORCID: 0000-0002-2064-4052 and Tan, Chih Ming (2015) Robust multiple regimes in growth volatility. Empirical Economics, 48 (1). pp. 461-491. ISSN 0377-7332

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In this paper, we uncover growth volatility regimes and identify their robust determinants using a large international panel of countries. In doing so, we propose a novel empirical methodology that allows us to simultaneously deal with two key elements of model uncertainty, namely theory uncertainty and parameter heterogeneity, by unifying two recent econometric techniques: Bayesian model averaging and threshold regression. We find ample evidence of parameter heterogeneity and model uncertainty.Our results highlight the role of ethnic fractionalization, institutions, financial development, health, and geography.

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