Growth and Volatility Analysis Using Wavelets

The magnitude and persistence of growth in gross domestic product are topics of intense scrutiny by economists. Although the existing techniques provide a range of tools to study the nature of growth and volatility time series, these usually come with shortcomings, including the need to arbitrarily define acceleration spells, and focus on a particular frequency at a time. This paper explores the application of "wavelet-based" techniques to study the time-varying nature of growth and volatility. These techniques lend themselves to a more robust analysis of short-term and long-term determinants of growth and volatility than the traditional decomposition techniques, as demonstrated on a small sample of countries. In addition to having desirable technical advantages, such as localization in time and frequency and the ability to work with non-stationary series, these techniques also make it possible to accurately decompose the association between growth trajectories of different countries over different time horizons. Such "co-movement" analysis can provide policy makers with important insights on regional integration, growth poles, and how short and long term developments in other countries affect their domestic economy.

Bibliographic Details

Main Authors:	Maslova, Inga, Onder, Harun, Sanghi, Apurva
Language:	English en_US
Published:	World Bank, Washington, DC 2013-08
Subjects:	AMERICAN ECONOMIC ASSOCIATION, AMERICAN ECONOMIC REVIEW, AVERAGE GROWTH, AVERAGE GROWTH RATE, AVERAGE GROWTH RATES, BLACK MARKET, BLACK MARKET PREMIUM, BUSINESS CYCLE, BUSINESS CYCLE VOLATILITY, BUSINESS CYCLES, CAPITA GROWTH, COMMODITY, COMMODITY PRICE, COMMODITY PRICES, CONSUMPTION GROWTH, CORRELATION ANALYSIS, CORRELATION COEFFICIENT, CORRELATIONS, CREDIT CONSTRAINTS, CROSS COUNTRY, CUSTOMS UNION, DATA AVAILABILITY, DEBT, DEBT CRISIS, DEVELOPED COUNTRIES, DEVELOPING COUNTRIES, DEVELOPING ECONOMIES, DEVELOPMENT POLICY, DOMESTIC ECONOMY, ECONOMIC ACTIVITIES, ECONOMIC DECLINE, ECONOMIC DOWNTURN, ECONOMIC DOWNTURNS, ECONOMIC GROWTH, ECONOMIC MANAGEMENT, ECONOMIC POLICY, ECONOMIC REFORM, ECONOMIC UNIONS, ECONOMICS, ESTIMATORS, FINANCIAL DATA, FLUCTUATIONS, FOREIGN CURRENCIES, FREE TRADE, FUNCTIONAL FORM, GROSS DOMESTIC PRODUCT, GROWTH LITERATURE, GROWTH PERFORMANCE, GROWTH PROCESS, GROWTH RATES, GROWTH RELATIONSHIP, HIGH INCOME, HIGH INCOME COUNTRIES, IMPACT OF VOLATILITY, INCOME, INCOME GROUP, INCOMES, INTERNATIONAL BUSINESS, LINK BETWEEN VOLATILITY, LONG RUN, LONG-TERM GROWTH, LOW INCOME, LOW INCOME COUNTRIES, LOW INCOME COUNTRY, MACROECONOMIC DYNAMICS, MARGINAL PROPENSITY, MEDIUM TERM, METHODOLOGY, MIDDLE INCOME, MONETARY UNION, NEGATIVE EFFECT, OUTPUT, OUTPUT GROWTH, PER CAPITA GROWTH, PER CAPITA INCOME, PER CAPITA INCOME LEVELS, POLICY MAKERS, POLICY RESEARCH, POVERTY REDUCTION, PURCHASING POWER, PURCHASING POWER PARITY, RAPID GROWTH, REGIONAL INTEGRATION, RESEARCH WORKING PAPERS, RICH COUNTRIES, RISK SHARING, SHARP REDUCTION, SIGNIFICANT CORRELATION, STRUCTURAL BREAK, TECHNIQUES, TIME SERIES ANALYSIS, VARIABILITY, VOLATILITY, wavelets, growth acceleration,
Online Access:	http://documents.worldbank.org/curated/en/2013/08/18124857/growth-volatility-analysis-using-wavelets https://hdl.handle.net/10986/16011
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