This paper investigates the relationship between output variability and economic growth using a GARCH-M model with industrial production in postwar Great Britain. The data reveals a positive relationship between variability and growth rates. Copyright 1996 by Scottish Economic Society.

The monetary disturbance theory of the Depression, explained by Friedman and Schwartz (1963) asserts that the Depression was so deep and long because the Federal Reserve pursued a tight monetary policy. More recently, Bernanke (1983) has shown that financial market crisis also lowered output in...