Modeling Sustainable Economic Growth and Volatility Dynamics in Developing Asia: An EGARCH-Based Macroeconomic Approach

Modeling Sustainable Economic Growth and Volatility Dynamics in Developing Asia: An EGARCH-Based Macroeconomic Approach | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Modeling Sustainable Economic Growth and Volatility Dynamics in Developing Asia: An EGARCH-Based Macroeconomic Approach Marselinus Asri This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-7988525/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract The Research Problem Most empirical research investigating economic growth in the developing world has tended to focus on the relationship between investment, inflation, and productivity without providing an adequate representation of the volatility dynamics that drive variation in growth rates. Nevertheless, the endurance and asymmetry of macroeconomic disturbances are underexplored in the case of emerging Asian economies due to substantial differences in economic structure between their sub-regions. This paper fills that gap by analysing the interrelationship between volatility in inflation, changes in the current account position, and external shocks, and their impact on sustainable economic growth in Developing Asia. Institutional Setting It is based on the Asian regional context1 covering economies with different degrees of openness, policy coordination, and depth of financial markets in East Asia, South Asia, Southeast Asia, Central Asia, and the Pacific. These countries constitute a natural experiment to study the effects on macroeconomic dynamics of both domestic and foreign shocks. The dataset used has been taken from the World Bank’s World Development Indicators and the Asian Development Outlook (2017–2023) for cross-country comparability and strength of data within the framework of an international institution. The Test Hypotheses Based on the endogenous growth model and volatility theories, this paper assumes that macroeconomic fluctuations, especially inflation and current account movements, affect the growth of GDP in an asymmetric way. Decrement hypotheses in particular predict that negative shocks will be more severe and persistent than positive ones, due to structural fragilities in financial resilience. Moreover, we expect economies with more inflation instability and external imbalances to have a greater volatility of growth and less speed of adjustment after an expansionary shock. Adopted Methodology The analysis employs an Exponential Generalized Autoregressive Conditional Heteroskedasticity(EGARCH) model, estimated using EViews statistical software, to account for conditional volatility and asymmetry caused by GDP growth. The model permits positive and negative shocks to be distinguished more, which allows for the possibility of volatility persistence over time. Supportive descriptive statistics and correlation matrices are employed to confirm the stability of macroeconomic variables. Scenario simulations are used for the forecast of 2025–2030 potential growth paths under different levels of volatility. Findings and Implications The empirical results indicate that macroeconomic volatility in Developing Asia is persistent and asymmetric, with the detrimental effects of negative shocks being more prolonged on GDP growth. The paper finds that inflation volatility and external-account instability are the most important determinants of macroeconomic risk. Economies in East and Southeast Asia are relatively insulated through diversified economic structures and policy buffers, while those in South Asia and the Pacific appear to be most fragile in reacting to shocks emanating from outside the region. Policy implications stress the importance of continued control over inflation, fiscal discipline, and productivity-oriented reforms to better sustain growth. These results enhance the existing body of research on macroeconomic stability by showing that EGARCH modeling can measure volatility asymmetry and forecast sustainable growth in emerging market countries. JEL Classification : C32 ;E31 ;E44 ;F43 ;O47 ;O53 Macroeconomics Economic Growth Macroeconomic Volatility EGARCH Model Sustainable Growth Full Text Additional Declarations The authors declare potential competing interests as follows: no Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-7988525","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":537439325,"identity":"f8b34718-afbc-4901-8a0d-7a4f5178d68a","order_by":0,"name":"Marselinus 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