The Determinants of Growth Rate Volatility in European Regions

In this paper we analyze the determinants of growth rate volatility (GRV) of per capita GDP of 257 regions belongs to 25 EU coun- tries in the period 1992 − 2008. Among the determinants at regional level the growth rate of employment has a negative impact on GRV, while investment rate, the shares of agriculture, construction, finance and manufacturing, the share of household expenditure on GDP (the latter only for GRV due to positive shocks) have a positive impact; among the determinants at country level, government expenditure has a negative impact on GRV, while share of credit to private sector on GDP and inflation have a positive impact on GRV; finally, among the aggregate determinants, the volatility of the oil price has an asymmet- ric effect on GRV by increasing the volatility generated by negative shocks and reducing the volatility in case of negative shocks, while the participation to EMU only reduces the volatility due to positive shocks.