The effect of output growth volatility on output growth: empirical evidence from Turkey

ABSTRACT

This article assesses the effect of output growth volatility on output growth within a stochastic-volatility-in-mean model with a time-varying framework for an open small economy: Turkey. Until now, the empirical evidence on industrial production mainly reveals that this relationship is negative. However, in further examining different sectors and sub-sectors of industrial production, we find the sign of the relationship changes depending on the sector. Moreover, there is limited evidence that the sign of the relationship changes over time. Thus, the evidence reveals that the nature of the output growth volatility–output growth relationship is not uniform across sectors.

KEYWORDS:

• Output growth volatility
• output growth
• TVP-SVM

JEL CLASSIFICATION:

• E23
• E10
• O40
• C52

Acknowledgements

We would like to thank Rana Nelson for her valuable suggestions

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ See Tsouma (2014) for a theoretical and empirical literature review.

² See http://data.worldbank.org/data-catalog/GDP-PPP-based-table.