Output variability and growth rate of output in South Korea

We examine the relationship between output variability and the growth rate for South Korea by using quarterly data. We use two data series: GDP and the index of industrial production. We test for stationarity using Ng-Perron unit root tests. We find that the growth rate of GDP is non-stationary but the growth rate of industrial production is stationary. Thus, we use the ARCH-M model for the growth of industrial production. A number of specifications of the ARCH-M model are used. In all cases, the results show that the output variability has a positive but insignificant effect on the growth rate of output.