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.