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<p>This paper performs a sensitivity analysis of the effects of the Economic Vulnerability Index (EVI) on economic growth both theoretically and empirically. The first part uses Continuous Time Stochastic Optimal Control techniques to build a stochastic endogenous growth model which illustrates that an increase in Economic Vulnerability reduces the growth rate in the Economy. The second part employs the new Dynamic Common Correlated Effects Estimator for Heterogeneous Cross-Sectionally Dependent Dynamic Panels Data to empirically undertake the sensitivity analysis of the impacts of the Economic Vulnerability Index on growth. To this end, we build many Economic Vulnerability Indices by changing how its components enter its definition according to a wide range of possible scenarios. Then we utilize the Dynamic Common Correlated Effects Estimator for Heterogeneous Cross-Sectionally Dependent Dynamic Panels Data to estimate various econometric models. The advantages of this econometric technique, compared to the literature, is that it takes into account the heterogeneity of the countries while being at the same time a dynamic panel data method. The empirical results corroborate the theoretical predictions that Economic Vulnerability acts negatively on economic growth in all of the scenarios.</p>

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A Sensitivity Analysis on the Economic Vulnerability-Growth Nexus: Theory and Practice

  • 期刊论文

  • 发表日期：

    2026年3月12日

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  • Ibrahima Amadou Diallo

摘要

This paper performs a sensitivity analysis of the effects of the Economic Vulnerability Index (EVI) on economic growth both theoretically and empirically. The first part uses Continuous Time Stochastic Optimal Control techniques to build a stochastic endogenous growth model which illustrates that an increase in Economic Vulnerability reduces the growth rate in the Economy. The second part employs the new Dynamic Common Correlated Effects Estimator for Heterogeneous Cross-Sectionally Dependent Dynamic Panels Data to empirically undertake the sensitivity analysis of the impacts of the Economic Vulnerability Index on growth. To this end, we build many Economic Vulnerability Indices by changing how its components enter its definition according to a wide range of possible scenarios. Then we utilize the Dynamic Common Correlated Effects Estimator for Heterogeneous Cross-Sectionally Dependent Dynamic Panels Data to estimate various econometric models. The advantages of this econometric technique, compared to the literature, is that it takes into account the heterogeneity of the countries while being at the same time a dynamic panel data method. The empirical results corroborate the theoretical predictions that Economic Vulnerability acts negatively on economic growth in all of the scenarios.