2016/01 | LEM Working Paper Series | ||||||||||||||||
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Going Up and Down: Rethinking the Empirics of Growth in the Developing and Newly Industrialized World |
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Francesco Lamperti and Clara Elisabetta Mattei |
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Keywords | |||||||||||||||||
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growth, structural breaks, expansionary and recessionary regimes, convergence
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JEL Classifications | |||||||||||||||||
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O11, O40, O47
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Abstract | |||||||||||||||||
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Growth dynamics are remarkably heterogeneous, in particular when one
focuses on developing countries. Economic miracles and failures are
embedded within extended phases of either growth or decline. We
propose a methodology and a taxonomy that will characterize countries’
growth patterns on the basis of the sequence of regimes they
experience. In particular, we emphasize the difference between
expansionary and recessionary regimes and, after classifying the
growth pattern of all 123 developing countries in our dataset, we
explore cross-sectional empirical regularities which emerge during
upward and downward growth phases. Results show that expansionary
regimes are associated with convergence and positive correlation
between growth and (short run) volatility. On the contrary, in
recessionary regimes, poorer countries face deeper failures and a
negative correlation between growth and volatility is found,
signifying that output fluctuates less around the trend during strong
rather than mild recessions. Finally, we discover that regimes of
growth and recession show similar average length (about 16
years). Although recessions on average are remarkably pronounced (14%
loss), during expansions the magnitude of growth is much larger.
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