UK output variability and growth: Some further evidence

This paper re-examines the empirical evidence concerning the relationship between UK output variability and growth using GARCH-M models applied to post-war monthly industrial production data, estimated under quasi-maximum-likelihood with the consistent variance-covariance estimator of Bollerslev and Wooldridge (1992). In contrast to previous results suggesting a significant positive relationship between UK output variability and growth, we find no significant relationship. Rather than suggesting a connection between risk and return in the attitudes of investors, our findings may be interpreted as more supportive of macroeconomic models which dichotomize the determination of output growth and variability.