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Volatility, Growth and Labour Elasticity

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Author Info

  • Barbara Annicchiarico

    ()
    (University of Rome ‘Tor Vergata’. Italy)

  • Luisa Corrado

    ()
    (University of Cambridge, UK and University of Rome ‘Tor Vergata’, Italy)

  • Alessandra Pelloni

    ()
    (University of Rome ‘Tor Vergata’ and The Rimini Centre of Economic Analisys, Italy)

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 The Rimini Centre for Economic Analysis in its series Working Paper Series with number 32-08.

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Date of creation: Jan 2008
Date of revision: Jan 2008
Handle: RePEc:rim:rimwps:32-08

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Related research

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

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Cited by:
  1. González, Roberto & Sala, Hector, 2011. "The Frisch Elasticity in the Mercosur Countries: A Pseudo-Panel Approach," IZA Discussion Papers 5993, Institute for the Study of Labor (IZA).

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