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Economic diversification increases the level of democracy and leads to greater output stability. This is because diversification is associated with an increased share of the population organized into interest groups that compete to pressure governments to pursue policies favouring their particular group. The increase in the share of the population organized in this way is indicative of an increase in the level of democracy. As diversification and the level of democracy (number of interest groups) increases, the government must pursue policies aimed at satisfying the largest number of groups, which limits its scope to implement policies that destabilize output growth. Empirical support for these hypotheses is provided from applying dynamic and heterogeneous panel data estimation techniques to a panel of 117 countries over 1995–2015. The results show a positive and significant relationship between economic diversification and democracy, on the one hand, and between diversification and output stability, on the other hand. Moreover, the positive impact of economic development on democracy and output volatility is conditional on development being accompanied by economic diversification. [ABSTRACT FROM AUTHOR]

In the pursuit of sustainable economic development, this study investigates the nexus between carbon emissions, renewable energy utilization, trade openness, foreign direct investment and output volatility across selected East Asia–Pacific nations. Employing advanced ARDL bound tests, our results reveal a robust long-term relationship among these selected variables. Notably, our findings underscore the significant impact of carbon emissions on output volatility across all examined nations, except for Malaysia. Moreover, the study highlights the positive impact of renewable energy on output volatility, signaling a compelling imperative for policymakers to prioritize initiatives aimed at curbing carbon emissions and fostering the widespread adoption of renewable energy sources. [ABSTRACT FROM AUTHOR]

Fintech, broadly encompassing financial innovations enabled by digital technology, has seen phenomenal growth across emerging and developing economies (EMDEs) over the last few years. While the fintech revolution can facilitate broader financial inclusion and spur overall economic growth, concerns have been raised about the possible impact of fintech on growth volatility. Using a selected heterogeneous panel of 40 EMDEs spanning 2009 to 2017 we find that greater digital financial inclusion persistently exacerbates output volatility, although this result holds true only in countries with low banking concentration. Our results are robust to both different definitions of digital financial inclusion and alternative methodologies controlling for potential endogeneity. [ABSTRACT FROM AUTHOR]

Firm-level data from the Korean manufacturing sector is used to quantify the impact of both the extensive and intensive margins of exporting on employment, emphasizing the role of both firm-level R&D intensity and exports to foreign affiliates. The employment effects of exporting by employment contract status, i.e. regular or non-regular employees, are also separately examined. Here, findings show that a firm's entry into export markets has a positive effect on its employment of regular workers; further, this positive effect is apparent in firms that belong to the group with the highest level of R&D intensity. With regard to the intensive margin, findings show that the negative impact on regular employment of firms' export share in total sales stands out in the case of exports to non-affiliates. This negative impact, related to the intensive margin, is apparent in firms belonging to the group with the lowest R&D intensity, which is in line with the results for the extensive margin. The heterogeneous effects of exports depending on both firm-level R&D intensity and exports to foreign affiliates seem to be associated with the uncertainty that is due to the volatility of overseas sales. [ABSTRACT FROM AUTHOR]

In this study, we explore whether more complex economies are better shielded against exogenous shocks. We contribute to the literature on determinants of output volatility with a relatively new index on productive capabilities of export goods, the Economic Complexity Index (ECI), developed by Hausmann et al. [Hausmann, R., C. A. Hidalgo, S. Bustos, M. Coscia, A. Simoes, and M. A. Yildirim. 2014. The Atlas of Economic Complexity: Mapping Paths to Prosperity. MIT Press]. The ECI measures the productive capabilities of countries by explaining the knowledge accumulated in a population based on the goods produced and exported and to which countries they export. Therefore ECI captures diversification as well as the technology embedded in the products. Using panel data analysis for a cross section of countries from 1984 to 2016, we find variations in the effects of ECI on output volatility between high and low income countries. For high income countries, increases in ECI reduce output volatility in the short to medium term with a longer delay in output volatility moderation for low income countries. Findings suggest that low income countries have less diversified and less complex export goods which leave them open to external shocks and reduce their ability to adjust quickly to the shocks. Furthermore, disaggregation by regions reveals that economic complexity in Asia is relatively more effective at reducing output volatility than in Africa. [ABSTRACT FROM AUTHOR]

This paper investigates trade volatility in the Association of Southeast Asian Nations Plus Three (ASEAN+3) and its links with output volatility, export diversification, and free trade agreements. To achieve this research objective, we apply several econometric estimators to data from all ASEAN+3 member states over the period 1990–2016. We first find evidence of a positive relationship between output volatility and trade volatility. Second, we reveal that the way export diversification is measured can influence its impacts on bilateral export volatility. Moreover, the relationship between income volatility, trade volatility, and export diversification seems to depend on country size and the level of economic development.

Research background: Output volatility has potentially adverse consequences on the economy and the stabilizing role of fiscal policy is linked to the share of government size in an economy. Hence, given the relative large share of government in developing countries, government size is expected to play an important role in stabilizing output volatility.

This study uses the output volatility–augmented environmental Kuznets curve (EKC) model to determine the dynamic short- and long-term impacts of the volatility of economic growth (VOL) on carbon dioxide (CO2) emissions in Turkey from 1980 to 2015. The results of the autoregressive distributed lag (ARDL) approach indicate that there is a long-run relationship between CO2, per capita real GDP, per capita energy use, and VOL. The coefficients obtained from the ARDL estimation indicate that economic growth and energy use increase CO2 emissions, while VOL decreases CO2 emissions in the long run. Moreover, the coefficients obtained from the ARDL error correction model show that VOL decreases CO2 emissions in the short run, as well. We also find that the EKC is valid in Turkey. This implies for the Turkish case that achieving macro-stability under a "just transition" is key for achieving both economic and environmental benefits from ratifying international agreements such as Paris Agreement and EU Green Deal. [ABSTRACT FROM AUTHOR]

The fact is that output volatility and carbon dioxide (CO2) emissions move together over the period. This empirical study examines the dynamic effect of output volatility on CO2 emissions using the advance nonlinear panel autoregressive distributed lag (ARDL) approach. The empirical analysis is executed for ten high emitters Asian countries covering the period from 1990 to 2019. The findings reveal that positive change in output volatility increases CO2 emissions and negative change in output volatility decreases CO2 emissions in the long run in Asia. The results also show that digitization also positively impacts environmental quality in Asia due to green globalization. The findings are also robust and similar in an alternative indicator of the environment. An important policy is that reducing volatility in output is a suitable way of environmental sustainability, particularly for Asian countries. [ABSTRACT FROM AUTHOR]

The 2007–2008 global financial crisis has spurred an increasing interest for investigating the financial and macroeconomic effects of the rare but extremely large economic crises, the so-called economic disasters. Current literature on the topic shows that probability of economic disasters plays an important role in the long-run effect of output volatility on investment. This paper investigates the long-run relationship between economic disasters and aggregate investment. We analyze the data for a large number of developing and developed countries after the World War II. The conducted panel data analysis indicates a negative effect of the probability of economic disasters on aggregate investment. Our results contribute to the recent literature on economic disasters by providing empirical support for the hypothesis that probability of infrequent but extremely large economic crises has a negative long-run effect on investment. We also find that the effect of 'normal' output volatility on aggregate investment is relatively small. [ABSTRACT FROM AUTHOR]

This paper studies the implications of price flexibility on output volatility under menu costs and finds price flexibility to be output-destabilizing under supply shocks, but not necessarily so under demand shocks. We illustrate that such a result hinges on the extent to which firms can adjust along both the intensive and the extensive margins, the latter of which is often absent in the literature. [ABSTRACT FROM AUTHOR]

This paper examines the role of external debt financing (EDF) in shaping the credit cycles and the joint implications of EDF flows and credit growth for the output volatility in ten major emerging economies. We find that extreme phases—known as surge and stop episodes—in EDF flows are significantly associated with credit surges and stop episodes as shown by a panel multinominal logit estimation. However, the association is asymmetric—EDF stop episodes are more likely to bring about a credit stop episode compared to the occurrence of credit surges due to EDF surges. The results suggest vulnerabilities of credit cycles of EMEs to the sharp movement in EDF flows which in turn is typically synchronized with global liquidity conditions. In the second part of our analysis, using the bias-corrected LSDV estimation for the dynamic panels, we find that EDF flows and credit jointly have a strong amplifying impact on the output volatility. Moreover, EMEs also face large output volatility when EDF stop and credit stop episodes occur together. The results implicate a broader welfare loss in the form of output fluctuations due to a strong synchronization between external debt financing and domestic credit conditions. Significant output fluctuations are also a cause of concern for policymakers in EMEs who seek to insulate their economies from external and domestic financial shocks. [ABSTRACT FROM AUTHOR]

This study examines the link between environmental indicators and output volatility unlike the previous literature that mainly emphasized the importance of carbon emissions and economic growth nexus. Output uncertainty is considered a serious global issue as it undermines economic gains and quality of life. This study scrutinizes the impact of greenhouse gas emissions on output volatility in 155 countries over the period 1971- 2017. The empirical analysis is based on Pooled Ordinary Least Squares, Random and Fixed Effects Models. The empirical results confirm that carbon dioxide (CO2), nitrogen oxide (NOX), methane (CH4), and total greenhouse gas (GHG) emissions are positively contributing to amplify global output volatility. Moreover, the Principal Component Analysis (PCA) of pollutant indicators also confirms the main results. Comparatively carbon emissions are contributing more to augment output volatility. A comparative analysis also reveals that all pollutants augment output volatility more in agricultural economies. The results of Granger causality confirm the bidirectional causality between environmental degradation and output volatility providing an evidence of endogeneity problem. To address it, the system GMM estimator is used by incorporating the instruments in output volatility model and the results of system GMM are also consistent with main findings. Findings of the study imply that a promising path of sustainable growth can be achieved by adopting the alternative ways of energy resources that produce less pollutant relative to greenhouse gasses.

This study examines the effect of environmental degradation on output volatility using spatial panel data models namely spatial lag model (SLM), spatial error model (SEM) and spatial Durbin model (SDM). For a comparative analysis, non-spatial models namely pooled OLS, fixed effects and random effects are also employed. Environmental degradation is proxied through carbon dioxide (CO2) emissions. The analysis is performed for 127 nations covering the period from 1996 to 2014. The findings reveal that environmental degradation increases output volatility in both non-spatial and spatial models. Furthermore, spillover effects of carbon emissions are positive and significant suggesting that national output volatility increases with the increase in adjacent economy’s carbon emissions. Further, the spatial parameters spatial rho and lambda are also positive and significant proving the arguments that output volatility in one specific location spillovers to the nearby neighbor and to the far away trading partner. These findings are robust to the use of methane emissions as an alternative environmental indicator. The findings suggest that to attain sustainable growth, regulatory authorities need to take actions for minimizing environmental degradation not only from its own country but also from the international community to control the environmental stress.

Economic complexity measures the productive knowledge embedded in an economy by analysing the export structure of countries. Although the recent literature suggests that economic complexity might arise as a useful tool to lower output volatility by both diversifying export bundles and increasing the sophistication of exports, the empirical evidence on this issue is rather scarce. We contribute to the existing literature by investigating the effect of economic complexity on output volatility for a large set of developing countries. To this end, we apply a panel vector auto regression (PVAR) methodology, which allows us to capture the dynamic interrelationships between variables. The findings of the paper robust to the alternative specifications reveal that economic complexity affects output volatility negatively. Hence, economic policies aimed at diversifying productive capabilities and export bundles should be one of the major priorities in developing countries. [ABSTRACT FROM AUTHOR]

This study explores the impact of environmental degradation on output volatility for eight South Asian economies over the time span 1971–2017. Environmental degradation is measured by CO2 emissions, nitrous oxide (N2O), methane emissions (CH4), greenhouse gas emissions (GHG), and environmental pollutants index (EPI), whereas output volatility is constructed using a rolling window of five-year moving standard deviation. The results of cross-sectional dependence (CSD) tests indicate the presence of CSD among South Asian economies. For empirical analysis, second-generation panel time series approaches are employed. Also, the findings of panel unit root tests (URTs) signify that the variables are stationary at the first difference and have a long-run relationship. Westerlund cointegration test is used to assess the long-run relationship among the variables. Moreover, this study has used a fully modified ordinary least square (FMOLS) and dynamic modified ordinary least square (DOLS) methods to examine the relationship between environmental degradation and output volatility. In the long run, all indicators of environmental degradation are positive and significant signaling the harmful effects of environmental degradation on output volatility. However, the impact of nitrous oxide is larger relative to other indicators used in the study. The outcome, therefore, suggests that promoting clean investment in nitric acid plants might help improve the environmental quality in the region which in turn fosters the process of economic stability. [ABSTRACT FROM AUTHOR]

This paper empirically investigates if, in what direction, and under what circumstances financial inclusion amplifies or moderates output volatility, which is a matter of concern for monetary policymakers in emerging and developing economies (EMDEs). The empirical estimation for a large panel of over 100 EMDEs spanning the period 1995 to 2013 finds a strong and persistent trade-off between higher financial inclusion and output stability. The paper also finds strong and robust evidence of non-linearity governing this relationship. Countries with high degrees of financial inclusion as well as those that are relatively lower income tend to experience a significant trade-off between financial inclusion and output stability. Further, the paper also finds that reckless financial inclusion coinciding with excessive credit growth tends to worsen output volatility. [ABSTRACT FROM AUTHOR]

We examine the effect of financial integration, measured based on both volume and equity, on output volatility using five‐year non‐overlapping annual average data windows for sixty countries over the 1971–2015 period. We construct aggregate‐ as well as sub‐panels based on income and region. Financial integration reduces output volatility in aggregate and income panel, but not in all regions. Foreign direct investment (FDI) and foreign portfolio investment (FPI) reduces output volatility in developed countries, but only FDI reduces output volatility in developing countries. Financial regulatory architecture should aim at attracting FDI and macroeconomic and structural reforms to reap the benefits of FPI flows. [ABSTRACT FROM AUTHOR]

This study seeks to uncover the role played by the public sector wage premium in explaining the output volatility. Furthermore, the study also explores the factors that might substantiate the cross-country differences in the volatility of the public sector wage premium. Using cross-sectional regression analysis for the European Union countries, the findings indicate that more volatile public sector wage premium is associated with higher fluctuations in the private sector employment and less stable growth. Findings also suggest that volatility of the public sector wage premium tends to be larger in countries with smaller governments and in countries where collective bargaining is the predominant regime for public sector wage setting.

Lowering the policy interest rate could stimulate consumption and investment while discouraging people from saving. However, such a move may also prompt people to save more to compensate for the low rate of return. Using the data of 135 countries from 1995 to 2014, we show that a low interest rate environment can yield different effects on private saving under different economic environments. The real interest rate affects private saving negatively if output volatility, old-age dependency, or financial development is above a certain threshold. Depending on a country's specific economic circumstances, these effects are significant for the economy — a four-percentage point decline in the real interest rate, which is approximately the same as one standard deviation for China, would lead to a 1.52 percentage point increase in the Chinese private saving rate. Further, when the real interest rate is below 1.1%, greater output volatility would lead to higher private saving in developing countries. [ABSTRACT FROM AUTHOR]

In this paper, we investigated the interlinkages between real exchange rate volatility (VRER), consumer price volatility (VCPI), industrial output volatility (VLMI), and interest rate volatility (VINT) using monthly data covering the period January 1988-December 2017. We applied a multivariate model of Granger causality and found bidirectional causality between VRER and VLMI. Similarly, we found bidirectional causality between VRER and VINT. Whereas, unidirectional Granger causality running from VCPI to VRER, VLMI to VCPI, and VINT to VLMI. The results of variance decomposition show that the VRER error forecast is mainly attributed to its own shock. However, after 18 months it reaches to 94.6% while the remaining 5.4% error forecast is explained by VLMI, VCPI, and VINT shocks. In a similar manner, at a time horizon of 1 month, 99.5% of the VINT error forecast is associated with its own shock but after 18 months it declines to 89.6%. As expected, the VLMI error forecast is mainly attributed to its own shock and it declines to 97.2% after 18 months. Contrary to this, at a time horizon of 1 month, 97.6% of the VCPI error forecast is attributed to its own shock, whereas after 18 months, it rises to 98.8%, remaining 1.2% is due to VRER, VLMI, and VINT shocks. The impact of VRER on VRER, VCPI, and VINT is positive but it fades away with a short passage of time. Likewise, the effect of VCPI on VRER and VCPI is positive and convergent. In contrast, the response of VRER and VINT is positive and persistent. The response of all the macroeconomic series, except VLMI to VINT, is convergent. [ABSTRACT FROM AUTHOR]

This article investigates the long-run consequences of economic disasters. The results suggest the negative long-run effect of economic disasters on output growth and the limited empirical importance of the investment channel. [ABSTRACT FROM AUTHOR]

• Cooperative recovery strategy of distribution network and communication network under extreme weather. • Quantifying the Impact of Communication Networks on Resilience Recovery. • Deployment of emergency resource warehouse. • Consider the change in transmission line transmission capacity under DTR and STR. Aiming at the existing research ignoring the influence of communication network (CN) on resilience recovery strategy and evaluation of distribution network (DN), this paper will discuss the impact of communication network state on resilience recovery and construct corresponding quantitative evaluation indexes. Firstly, a comprehensive importance evaluation index is constructed for communication failures to determine the order of communication restoration in the failure area. Then the emergency communication recovery in the fault area is carried out by using 5G micro base station. Second, a quantitative evaluation index of the impact of communication on distribution network status recovery is established, considering the fluctuation of distributed power output and load. At the same time, thermal rating constraints are considered in load transfer and island formation, and the effects of static and dynamic thermal rating (DTR) on load recovery are compared. Considering the influence of emergency resource warehouse location on repair time during fault repair, the location of the resource warehouse is determined through spectral clustering to improve repair efficiency. At the same time, the average headway time is introduced to quantify the impact of extreme weather on traffic, modify the road resistance model, and then use the minimum road method to establish an emergency recovery strategy that considers the effects of extreme weather. The IEEE-123 node system is used as an example to verify the rationality of the resilience recovery strategy and the resilience assessment with communication impact. [ABSTRACT FROM AUTHOR]

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Copyright of Economica (00130419) is the property of Universidad Nacional de La Plata and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

ABSTRACT: This paper explores whether conducting scientific and technical (S&T) research reduces the volatility of output growth. The paper finds robust evidence that output volatility is significantly lowered by a country's production of S&T publications. The results show that the effect of S&T publications on output volatility is particularly strong in middle‐income, OECD and other high‐income countries. However, for East‐Asian, low‐income and sub‐Saharan African countries the effect is either weak or absent. These results provide strong evidence that not only OECD and other high‐income countries are actively engaged in S&T research, emerging developing countries are also conducting S&T research, which is effective in reducing output volatility. The results are robust to adding a host of control variables, various subsamples and different estimation techniques. [ABSTRACT FROM AUTHOR]

Government is often considered the safe sector of an open economy that provides households with insurance against external risk exposure. Among highly integrated economies, however, households should be able to exploit common financial markets to insure themselves. In this paper we examine the relationship between government size, trade openness, and output volatility across fully integrated economies using Japan's regional income accounting and public finance data. The contributions of the government- and market-based insurances to inter-regional risk sharing are also estimated. The empirical results reveal some unique aspects of the state-market interactions under full economic integration with vertical fiscal imbalance. [ABSTRACT FROM AUTHOR]

The objective of the paper is to offer a critique on the theoretical and empirical literature on inflation targeting (IT). It seems to exist a consensus in the theoretical literature that this monetary regime reduces both inflation and output volatility, mainly through building monetary policy credibility. When the role of the exchange rate is discussed, while there are some arguments that, as an instrument, it should not be explicitly stated in the central-bank loss function, theoretical arguments and evidence are still mixed as regards the effectiveness of exchange-rate management under IT. On the empirical front, the paper concludes that despite the fact that the work on IT in the last two decades has been immense in quality and quantity, still there is no quantitatively-credible study for the developing world, let alone a study that appropriately measures the regime switch from one monetary strategy to another.

The existing literature has shown that the relationship between output volatility and growth depends on data and/or estimation methods. In this paper, an empirical examination is made of the link between output volatility and growth in Korea, China and Japan, using monthly data on the index of industrial product from 1990 to 2009. Specifically, a country’s growth and output volatility are measured by the ratio of change in industrial product and its conditional standard error, respectively. Using EGARCH-M model, provided by Nelson (1991), to accommodate the asymmetry of economic fluctuation, estimates indicates that output volatility is negatively and significantly associated with the growth in Korea. However, the relationship between output volatility and growth is positive and statically significant in China, whereas there exists very little evidence in Japan. Moreover, unexpected positive shocks have positive impacts on growth in Korea and China, whereas the impacts are very small in Japan. Regression results also suggest that the impacts of unexpected negative shocks on growth are negative in all countries, and the magnitude is the biggest in Korea and the lowest in Japan.