Abstract :
Growth and volatility correlate negatively across countries, but positively across sectors. Analytically, whether or not sectoral growth and volatility are correlated positively is irrelevant in the aggregate. Cross-country estimates identify the detrimental effects of macroeconomic volatility on growth, but they cannot be used to dismiss theories implying a positive growth–volatility coefficient, which appear to hold in sectoral data. In particular, volatile sectors command high investment rates, as they would in a mean–variance framework.
