Black’s hypothesis and developed economies

This paper examines the relationship between the volatility of output growth and the average growth rate of output in developed economies using the Generalized Auto-Regressive Conditional Hetereoskedasticity-in-mean (GARCHM) framework. The results indicate that that volatility is correlated with output growth for half of the countries and that the correlation is negative for some countries and positive for others. This finding is consistent with models that suggest country characteristics are important for determining the growth-volatility ralationship. However, the estimated correlation between volatility and the average growth rate is sensitive to the specification of the conditional variance equation. Copyright Springer 2002