Abstract :
Growth and volatility correlate negatively across countries, but positively across sectors.
Analytically, whether or not sectoral growth and volatility are correlated positively is irrelevant in
the aggregate. Cross-country estimates identify the detrimental effects of macroeconomic volatility
on growth, but they cannot be used to dismiss theories implying a positive growth–volatility
coefficient, which appear to hold in sectoral data. In particular, volatile sectors command high
investment rates, as they would in a mean–variance framework.
r 2006 Elsevier B.V. All rights reserved
Keywords :
Sectors , VolatilityARTICLE IN PRESSwww.elsevier.com/locate/jme0304-3932/$ - see front matter r 2006 Elsevier B.V. All rights reserved.doi:10.1016/j.jmoneco.2006.08.001$ , growth
