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Long-Term Growth and Short-Term Volatility: The Labour Market Nexus

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  • Annicchiarico, B.
  • Corrado, L.
  • Pelloni, A.

Abstract

We study the relationship between growth and variability in a DSGE model with nominal rigidities and growth driven by learning-by-doing. We show that this relationship may be positive or negative depending on the impulse source of fluctuations A key role is also played by the Frisch elasticity of labour supply and by institutional features of the labour market. Our general findings are that monetary shocks volatility will generally have a negative effect on growth, while the opposite tends to be true for fiscal and productivity shocks. These findings are somehow consistent with the existing empirical evidence: data show, in fact, a somewhat ambiguous relationship between output growth and real variability, but a generally negative relationship between output growth and nominal variability.

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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0823.

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Length: 24
Date of creation: Apr 2008
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Handle: RePEc:cam:camdae:0823

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Keywords: Growth; Volatility; Monetary and Real Shocks; Labour Supply Elasticity; Second-Order Approximation Methods.;

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Cited by:
  1. Barbara Annicchiarico & Alessandra Pelloni & Lorenza Rossi, 2010. "Endogenous Growth, Monetary Shocks and Nominal Rigidities," Quaderni di Dipartimento 120, University of Pavia, Department of Economics and Quantitative Methods.
  2. Elena Andreou & Alessandra Pelloni & Marianne Sensier, 2008. "Is Volatility Good for Growth? Evidence from the G7," Centre for Growth and Business Cycle Research Discussion Paper Series 97, Economics, The Univeristy of Manchester.
  3. Barbara Annicchiarico & Alessandra Pelloni, 2014. "Productivity growth and volatility: how important are wage and price rigidities?," Oxford Economic Papers, Oxford University Press, vol. 66(1), pages 306-324, January.
  4. Annicchiarico, Barbara & Rossi, Lorenza, 2013. "Optimal monetary policy in a New Keynesian model with endogenous growth," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 274-285.
  5. Christoph Priesmeier & Nikolai Stähler, 2011. "Long Dark Shadows Or Innovative Spirits? The Effects Of (Smoothing) Business Cycles On Economic Growth: A Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 25(5), pages 898-912, December.

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