This study will examine the relationship between economic growth and volatility in Turkey between 1990 and 2010. Period of 20 years will be discussed. This topic has recently attracted the attention of empirical macroeconomists. Economic growth and real business cycle were separated for a long time.
While explaining growth theory, volatility did not play a role. However recent empirical and theoretical developments change this point of view (Fountas, Karanasos 2008). Many studies have been conducted in order to interconnect business cycle and growth and subsequently relationships have been founded. Moreover, it can be shown that monetary stabilisation policy might be very effective if based on these relationships. By reducing stochastic volatility it might increase or decrease (depending on the source of the fluctuations) long-run economic growth (Blackburn, Pelloni 2005). Therefore these findings are important due to their potential to help every country achieve economic development and stability.
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