Nexus of Growth and Volatility in Case of Pakistan: Is There a Causal Connection?

Abstract

In this study, with the perspective of extensive debate investigating
relationship between growth and growth volatility, it has been tried
to capture a causal connection between these variables. Firstly,
using GARCH methodology the volatility of growth has been
measured from time series data of Pakistan from 1973 to 2012.
Thereafter, growth has been quantified with three different
variables i.e. real gross domestic product (GDP), GDP growth rate
and GDP growth per capita and for each of these growth variables
three different models have been constructed for bivariate time
series analyses to capture the causality connection. For this
purpose on the basis of unit root tests co-integration analyses have
been estimated properly and then with the help of Granger
Causality Tests it has been tried to find out the causal connection
between growth and growth volatility in each model separately.
Results of the study negate any type of causality in case of Pakistan
economy.