This study examines the structural, institutional, and political factors that influence the levels of economic volatility observed in low- and middle-income countries. Analyzing a sample of 86 countries over the period 1997-2019, the study finds that the determinants of per capita GDP growth volatility change as a country moves up the income ladder. For the developing countries with relatively low income levels, the most important sources of economic instability include the relative sizes of government spending and of credit supply, variations in agricultural productivity growth, and governing factors such as the level of law enforcement and the extent to which democratic practices are upheld. For the developing countries at higher income ranks, fluctuations in productivity growth (especially industrial and service productivity) and the scale of the agricultural sector are the most important contributors to their economic volatility. The study also finds a trade-off relationship between economic development and volatility, in which the achievement of the former is likely to result in a greater degree of the latter.
Le, Jenny Thao, "Determinants of Growth Volatility in Low- and Middle-income Countries" (2020). Mark A. Israel '91 Endowed Summer Research Fund in Economics. 8.