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On the Relationship Between Growth and Volatility in Learning-by-Doing Economies

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K Blackburn
A Pelloni

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Abstract

This paper contains an investigation into the potential linkages between the short-run (cyclical) and long-run (secular) movements in economic activity. The investigation is based on an analytically solvable stochastic monetary growth model in which learning-by-doing accounts for endogenous technological change. The dynamic general equilibrium of this model implies that both the first and second moments of disturbances have first-order effects on both the first and second moments of variables. Given this, it is shown that the correlation between the mean and variance of output growth depends fundamentally on two main factors - the source of stochastic fluctuations (real shocks or nominal shocks) and the functioning of the labour market (wage flexibility or wage rigidity). These results contradict certain common presumptions and may help to explain certain empirical evidence.

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Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 01.

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Length: 23 pages
Date of creation: 2001
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Handle: RePEc:man:cgbcrp:01

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  33. Larry E. Jones & Rodolfo E. Manuelli & Ennio Stacchetti, 1999. "Technology (and Policy) Shocks in Models of Endogenous Growth," NBER Working Papers 7063, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Paul A. de Hek, 2005. "Uncertain Technological Change under Capital Mobility," Tinbergen Institute Discussion Papers 05-033/2, Tinbergen Institute. [Downloadable!]
  2. Paul A. de Hek, 2004. "On Growth and Fluctuations: The Option to Adobt New Technology," DEGIT Conference Papers c009_017, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  3. Paul A. de Hek, 2003. "Endogenous Technological Change under Uncertainty," DEGIT Conference Papers c008_025, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
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