TITLE:
Growth and Volatility: An Analysis for the Brazilian Economy
AUTHORS:
Elano Ferreira Arruda, Felipe de Sousa Bastos, Pablo Urano de Carvalho Castelar, Fernando Marques Mansilla, Antônio Clécio de Brito
KEYWORDS:
Economic Growth, Volatility, GARCH-M
JOURNAL NAME:
Theoretical Economics Letters,
Vol.9 No.7,
October
24,
2019
ABSTRACT: This paper aims to analyze if there is a
relationship between economic growth and the volatility of that growth in the
Brazilian economy, and, if it exists, to infer if that relationship is positive
or negative, since the literature shows
evidence for both cases. For that purpose, the econometric strategy used is
that of a Generalized Autoregressive Conditional Heteroskedasticity in Mean
(GARCH-M) model, using economic growth data compiled by the Central Bank of
Brazil, for the period of 1995-2018. The results corroborate the findings of
the empirical literature, suggesting a negative relationship between economic
growth and its volatility; that is, the hypothesis of the irreversibility of
investments prevails. Therefore, the tradeoff between short-term stability and
long-term growth for the Brazilian economy in the analyzed period does not seem
to occur.