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| Author: | Turnovsky, S. J. Chattopadhyay, P. |
| Title: | Volatility and Growth in Developing Economies: Some Numerical Results and Empirical Evidence |
| Journal: | Journal of International Economics
2003 : MAR, VOL. 59:2, p. 267-296 |
| Index terms: | VOLATILITY DEVELOPING COUNTRIES GROWTH MODELS |
| Language: | eng |
| Abstract: | This paper analyzes the effect of volatility on growth in a developing economy facing an imperfect world capital market. The analysis comprises: the development of a formal framework for assessing the role of risk on growth; numerical simulation; and empirical testing of the model, using data from 61 developing economies. The authors find that the model plausibly replicates the equilibrium of small stylized economies subject to external and internal sources of risk. The authors define a benchmark economy and study the effects of various sources of risk and borrowing costs on the equilibrium growth rate, its variability, and welfare. The numerical results obtained are intuitive and supported by empirical evidence. |
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