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What Drives Output Volatility? The Role of Demographics and Government Size Revisited

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Abstract
This paper studies the determinants of output volatility in a panel of 22 OECD countries. In contrast to the existing literature, we avoid ad hoc estimates of volatility based on rolling windows, and we account for possible non-stationarity of the data. Specifically, output volatility is estimated by means of an unobserved components model where the volatility series is the outcome of both macroeconomic determinants and a latent integrated process. A Bayesian model selection is performed to test for the presence of the nonstationary component. The results point to demographics and government size as important determinants of macroeconomic (in)stability. In particular, a larger share of prime-age workers is associated with lower output volatility, while higher public expenditure increases volatility.
Keywords
Output volatility, demographics, fiscal policy, Bayesian model selection

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MLA
Iseringhausen, Martin, and Hauke Vierke. “What Drives Output Volatility? The Role of Demographics and Government Size Revisited.” European Economy Discussion Papers 2018 : n. pag. Print.
APA
Iseringhausen, M., & Vierke, H. (2018). What Drives Output Volatility? The Role of Demographics and Government Size Revisited. European Economy Discussion Papers. Brussels, Belgium: European Commission.
Chicago author-date
Iseringhausen, Martin, and Hauke Vierke. 2018. “What Drives Output Volatility? The Role of Demographics and Government Size Revisited.” European Economy Discussion Papers. Brussels, Belgium: European Commission.
Chicago author-date (all authors)
Iseringhausen, Martin, and Hauke Vierke. 2018. “What Drives Output Volatility? The Role of Demographics and Government Size Revisited.” European Economy Discussion Papers. Brussels, Belgium: European Commission.
Vancouver
1.
Iseringhausen M, Vierke H. What Drives Output Volatility? The Role of Demographics and Government Size Revisited. European Economy Discussion Papers. Brussels, Belgium: European Commission; 2018.
IEEE
[1]
M. Iseringhausen and H. Vierke, “What Drives Output Volatility? The Role of Demographics and Government Size Revisited,” European Economy Discussion Papers. European Commission, Brussels, Belgium, 2018.
@misc{8545299,
  abstract     = {This paper studies the determinants of output volatility in a panel of 22 OECD countries. In contrast to the existing literature, we avoid ad hoc estimates of volatility based on rolling windows, and we account for possible non-stationarity of the data. Specifically, output volatility is estimated by means of an unobserved components model where the volatility series is the outcome of both macroeconomic determinants and a latent integrated process. A Bayesian model selection is performed to test for the presence of the nonstationary component. The results point to demographics and government size as important determinants of macroeconomic (in)stability. In particular, a larger share of prime-age workers is associated with lower output volatility, while higher public expenditure increases volatility.},
  articleno    = {075},
  author       = {Iseringhausen, Martin and Vierke, Hauke},
  isbn         = {978-92-79-77405-8},
  issn         = {2443-8022},
  keywords     = {Output volatility,demographics,fiscal policy,Bayesian model selection},
  language     = {eng},
  pages        = {40},
  publisher    = {European Commission},
  series       = {European Economy Discussion Papers},
  title        = {What Drives Output Volatility? The Role of Demographics and Government Size Revisited},
  url          = {http://dx.doi.org/10.2765/540857},
  year         = {2018},
}

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