Robust multiple regimes in growth volatility
Tan, Chih Ming
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In this paper, we uncover growth volatility regimes and identify their robust determinants using a large international panel of countries. In doing so, we propose a novel empirical methodology that allows us to simultaneously deal with two key elements of model uncertainty, namely theory uncertainty and parameter heterogeneity, by unifying two recent econometric techniques: Bayesian model averaging and threshold regression. We find ample evidence of parameter heterogeneity and model uncertainty. Our results highlight the role of ethnic fractionalization, institutions, financial development, health, and geography. © 2014, Springer-Verlag Berlin Heidelberg.