Macroeconomic Volatility and External Balance Dynamics in Developing Asia: Evidence from GARCH and EGARCH Models

This paper analyzes the macroeconomic growth volatility and external balance stability nexus in developing Asia economies over 2017–2023. The paper utilizes data on annual GDP growth and current account balance (% of GDP) from the Asian Development Bank, the World Bank to undertake time-series econometrics analysis using GARCH(1,1) and EGARCH(1,1) approaches in EViews 13. The findings indicate that volatility of GDP growth and current account fluctuations persist, being exposed also to asymmetries. Volatility clustering was highest in 2020, driven by the COVID-19 shock, but gradually abated by 2023. The decomposition of the EGARCH measure also shows that negative current-account shocks generate higher volatility than positive ones, signaling structural frailties in external balances. Policy implications centre on the need for macroprudential stability frameworks, fiscal space, and regional cooperation to offset continued volatility and maintain growth. JEL Classification: C22, E32, F32, O11, O47