Regime Switching Stochastic Volatility: The Output Growth Behaviour

The output volatility can cause the recession in the economy by random shocks. Growth volatility, output variability, fluctuation in output, and business cycle volatility are used as the output uncertainty in the literature.   R egime switching and the stochastic volatility is combined within this paper to explain the behaviour of output growth and its volatility. Moreover, t his study pointed out the sign and direction of the relation between output growth and its uncertainty in Turkey as a developing country. In the scope of the study, a single economic variable is preferred as a reference series and, although GDP is the “reference” series that determines the situation of economic activity, monthly industrial production index series is used instead of quarterly basis GDP between 1987: 01-2017: 04 monthly periods.