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

Author (Person) ,
Author (Corporate)
Series Title
Series Details Number 75
Publication Date 17/01/2018
ISBN 978-92-79-77405-8
ISSN 2443-8022
Content Type


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.

Source Link https://ec.europa.eu/info/publications/what-drives-output-volatility-role-demographics-and-government-size-revisited_en
Alternative sources
  • https://ec.europa.eu/info/sites/info/files/economy-finance/dp075_en.pdf
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