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Growth and Output Fluctuations

  • Chol-Won Li

Output fluctuations are driven by expectations about the degree of competition in the product market (and R&D sector). We examine how the characteristics of endogenous cycles change in the long run, as labour productivity grows faster. Main results: (i) expansion (or contraction) occurs more (or less) frequently, (ii) expansion becomes milder but contraction severer, (iii) the amplitude of fluctuations becomes larger, (iv) the variance of output changes ambiguously, indicating a non-linear relation. Once the growth of labour productivity is endogenised with learning-by- doing, it grows faster in contraction if the strength of inter-industry learning spillovers is relatively weak.

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Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 9810.

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Date of creation: Oct 1998
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Handle: RePEc:gla:glaewp:9810
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