IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Productivity Growth and Volatility: How Important Are Wage and Price Rigidities?

  • Barbara Annicchiarico


    (Facoltà di Economia, Università degli Studi di Roma “Tor Vergata”, Italy)

  • Alessandra Pelloni


    (Facoltà di Economia, Università degli Studi di Roma “Tor Vergata”, Italy)

We study the implications of having different sources of nominal rigidities on the relationship between productivity growth and shocks volatility in a model with pro-cyclical R&D and imperfect competition in goods and labour markets. We show that the effects of uncertainty on long-term growth not only depend on the source of fluctuations, as recent literature shows, but also, and crucially, on whether prices and/or wages are rigid.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 02_13.

in new window

Date of creation: Jan 2013
Date of revision:
Handle: RePEc:rim:rimwps:02_13
Contact details of provider: Postal: Via Patara, 3, 47921 Rimini (RN)
Phone: +390541434142
Fax: +39054155431
Web page:

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. William T. Dickens & Lorenz Goette & Erica L. Groshen & Steinar Holden & Julian Messina & Mark E. Schweitzer & Jarkko Turunen & Melanie E. Ward, 2006. "How wages change: micro evidence from the International Wage Flexibility Project," Working Paper 0620, Federal Reserve Bank of Cleveland.
  2. K Blackburn & R Galindev, 2003. "Growth, Volatility and Learning," The School of Economics Discussion Paper Series 0303, Economics, The University of Manchester.
  3. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
  4. F. Alvarez & F. Lippi & L. Paciello, 2010. "Optimal price setting with observation and menu costs," 2010 Meeting Papers 478, Society for Economic Dynamics.
  5. Patrick Francois & Huw Lloyd-Ellis, 2003. "Animal Spirits Through Creative Destruction," American Economic Review, American Economic Association, vol. 93(3), pages 530-550, June.
  6. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
  7. Holger Strulik & Klaus Prettner & Alexia Prskawetz, 2011. "R&D-based Growth in the Post-modern Era," PGDA Working Papers 7411, Program on the Global Demography of Aging.
  8. K Blackburn & R Galindev, 2003. "Growth, volatility and learning," Centre for Growth and Business Cycle Research Discussion Paper Series 25, Economics, The Univeristy of Manchester.
  9. Comin, D. & Gertler, M., 2003. "Medium Term Business Cycles," Working Papers 03-05, C.V. Starr Center for Applied Economics, New York University.
  10. Luis J. Álvarez & Emmanuel Dhyne & Marco M. Hoeberichts & Claudia Kwapil & Hervé le Bihan & Patrick Lünnemann & Fernando Martins & Roberto Sabbatini & Harald Stahl & Philip Vermeulen & Jouko Vilmunen, 2005. "Sticky prices in the euro area: a summary of new micro evidence," Banco de Espa�a Working Papers 0542, Banco de Espa�a.
  11. Larry E. Jones & Rodolfo E. Manuelli & Henry E. Siu & Ennio Stacchetti, 2005. "Fluctuations in Convex Models of Endogenous Growth I: Growth Effects," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(4), pages 780-804, October.
  12. Ng, Yew-Kwang, 1980. "Macroeconomics with Non-Perfect Competition," Economic Journal, Royal Economic Society, vol. 90(3593), pages 598-610, September.
  13. Holden, Steinar & Wulfsberg, Fredrik, 2007. "Downward nominal wage rigidity in the OECD," Working Paper Series 0777, European Central Bank.
  14. Dawson, John W. & Stephenson, E. Frank, 1997. "The link between volatility and growth: Evidence from the States," Economics Letters, Elsevier, vol. 55(3), pages 365-369, September.
  15. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
  16. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August.
  17. Wang, Peng-fei & Wen, Yi, 2011. "Volatility, growth, and welfare," Journal of Economic Dynamics and Control, Elsevier, vol. 35(10), pages 1696-1709, October.
  18. Benigno Pierpaolo & Surico Paolo & Ricci Luca Antonio, 2011. "Unemployment and productivity in the long run: The role of macroeconomic volatility," wp.comunite 0085, Department of Communication, University of Teramo.
  19. Barbara Annicchiarico & Alessandra Pelloni & Lorenza Rossi, 2011. "Endogenous Growth, Monetary Shocks and Nominal Rigidities," CEIS Research Paper 187, Tor Vergata University, CEIS, revised 08 Mar 2011.
  20. Charles I. Jones & Paul M. Romer, 2009. "The New Kaldor Facts: Ideas, Institutions, Population, and Human Capital," NBER Working Papers 15094, National Bureau of Economic Research, Inc.
  21. Elena Andreou & Alessandra Pelloni & Marianne Sensier, 2008. "Is Volatility Good for Growth? Evidence from the G7," The School of Economics Discussion Paper Series 0804, Economics, The University of Manchester.
  22. Walde, Klaus & Woitek, Ulrich, 2004. "R&D expenditure in G7 countries and the implications for endogenous fluctuations and growth," Economics Letters, Elsevier, vol. 82(1), pages 91-97, January.
  23. Martin, Philippe & Ann Rogers, Carol, 2000. "Long-term growth and short-term economic instability," European Economic Review, Elsevier, vol. 44(2), pages 359-381, February.
  24. Larry E. Jones & Rodolfo E. Manuelli & Ennio Stacchetti, 2000. "Technology (and policy) shocks in models of endogenous growth," Staff Report 281, Federal Reserve Bank of Minneapolis.
  25. Gadi Barlevy, 2007. "On the Cyclicality of Research and Development," American Economic Review, American Economic Association, vol. 97(4), pages 1131-1164, September.
  26. Martin, Philippe & Rogers, Carol Ann, 1997. "Stabilization Policy, Learning-by-Doing, and Economic Growth," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 152-66, April.
  27. Erik Canton, 2002. "Business cycles in a two-sector model of endogenous growth," Economic Theory, Springer, vol. 19(3), pages 477-492.
  28. Charles I. Jones, 2004. "Growth and Ideas," NBER Working Papers 10767, National Bureau of Economic Research, Inc.
  29. Gadi Barlevy, 2003. "The cost of business cycles under endogenous growth," Working Paper Series WP-03-13, Federal Reserve Bank of Chicago.
  30. Barbara Annicchiarico & Luisa Corrado & Alessandra Pelloni, 2011. "Long‐Term Growth And Short‐Term Volatility: The Labour Market Nexus," Manchester School, University of Manchester, vol. 79(s1), pages 646-672, 06.
  31. Turnovsky, Stephen J. & Chattopadhyay, Pradip, 2003. "Volatility and growth in developing economies: some numerical results and empirical evidence," Journal of International Economics, Elsevier, vol. 59(2), pages 267-295, March.
  32. Aghion, Philippe & Saint-Paul, Gilles, 1998. "VIRTUES OF BAD TIMES Interaction Between Productivity Growth and Economic Fluctuations," Macroeconomic Dynamics, Cambridge University Press, vol. 2(03), pages 322-344, September.
  33. Blackburn, Keith, 1999. "Can Stabilisation Policy Reduce Long-Run Growth?," Economic Journal, Royal Economic Society, vol. 109(452), pages 67-77, January.
  34. Emmanuel Dhyne & Luis J. Alvarez & Herve Le Bihan & Giovanni Veronese & Daniel Dias & Johannes Hoffmann & Nicole Jonker & Patrick Lunnemann & Fabio Rumler & Jouko Vilmunen, 2006. "Price Changes in the Euro Area and the United States: Some Facts from Individual Consumer Price Data," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 171-192, Spring.
  35. Badinger, Harald, 2010. "Output volatility and economic growth," Economics Letters, Elsevier, vol. 106(1), pages 15-18, January.
  36. K Blackburn & A Pelloni, 2002. "Growth, Cycles and Stabilisation Policy," The School of Economics Discussion Paper Series 0216, Economics, The University of Manchester.
  37. Stilianos Fountas & Menelaos Karanasos & Jinki Kim, 2006. "Inflation Uncertainty, Output Growth Uncertainty and Macroeconomic Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(3), pages 319-343, 06.
  38. Shields, KalvInder & Kevin B Grier & Olan T Henry & Nilss Olekalns, 2003. "The Asymmetric Effects of Uncertainty on Inflation and Output Growth," Royal Economic Society Annual Conference 2003 187, Royal Economic Society.
  39. Wälde, Klaus & Woitek, Ulrich, 2003. "R&D expenditure in G7 countries and implications for endogenous fluctuations and growth," Dresden Discussion Paper Series in Economics 03/03, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  40. Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232316, June.
  41. Acemoglu, Daron & Zilibotti, Fabrizio, 1996. "Was Prometheus Unbound by Chance? Risk, Diversification and Growth," CEPR Discussion Papers 1426, C.E.P.R. Discussion Papers.
  42. Aghion, Philippe & Banerjee, Abhijit, 2005. "Volatility and Growth," OUP Catalogue, Oxford University Press, number 9780199248612.
  43. Klenow, Peter J. & Malin, Benjamin A., 2010. "Microeconomic Evidence on Price-Setting," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 6, pages 231-284 Elsevier.
  44. Philippe Aghion & George-Marios Angeletos & Abhijit Banerjee & Kalina Manova, 2005. "Volatility and Growth: Credit Constraints and Productivity-Enhancing Investment," NBER Working Papers 11349, National Bureau of Economic Research, Inc.
  45. Kevin B. Grier & Mark J. Perry, 2000. "The effects of real and nominal uncertainty on inflation and output growth: some garch-m evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(1), pages 45-58.
  46. Robert J. Barro, 2001. "Human Capital and Growth," American Economic Review, American Economic Association, vol. 91(2), pages 12-17, May.
  47. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  48. M. Ayhan Kose & Eswar S. Prasad & Marco E. Terrones, 2005. "Growth and Volatility in an Era of Globalization," IMF Staff Papers, Palgrave Macmillan, vol. 52(si), pages 31-63.
  49. Benassy, Jean-Pascal, 2011. "Macroeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195387711.
  50. de Hek, Paul A, 1999. "On Endogenous Growth under Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 727-44, August.
  51. Pelloni, Alessandra, 1997. "Nominal Shocks, Endogenous Growth and the Business Cycle," Economic Journal, Royal Economic Society, vol. 107(441), pages 467-74, March.
  52. Bredin, Don & Fountas, Stilianos, 2009. "Macroeconomic uncertainty and performance in the European Union," Journal of International Money and Finance, Elsevier, vol. 28(6), pages 972-986, October.
  53. Aghion, Philippe & Angeletos, George-Marios & Banerjee, Abhijit & Manova, Kalina, 2010. "Volatility and growth: Credit constraints and the composition of investment," Scholarly Articles 12490636, Harvard University Department of Economics.
  54. Javier Andrés & Ignacio Hernando, 1999. "Does Inflation Harm Economic Growth? Evidence from the OECD," NBER Chapters, in: The Costs and Benefits of Price Stability, pages 315-348 National Bureau of Economic Research, Inc.
  55. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, MIT Press, vol. 123(4), pages 1415-1464, November.
  56. Blackburn, Keith & Pelloni, Alessandra, 2004. "On the relationship between growth and volatility," Economics Letters, Elsevier, vol. 83(1), pages 123-127, April.
  57. Hnatkovska, Viktoria & Loayza, Norman, 2004. "Volatility and growth," Policy Research Working Paper Series 3184, The World Bank.
  58. Elder, John, 2004. "Another Perspective on the Effects of Inflation Uncertainty," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(5), pages 911-28, October.
  59. Blackburn, Keith & Galindev, Ragchaasuren, 2003. "Growth, volatility and learning," Economics Letters, Elsevier, vol. 79(3), pages 417-421, June.
  60. Partha Chatterjee & Malik Shukayev, 2006. "Are Average Growth Rate and Volatility Related?," Working Papers 06-24, Bank of Canada.
  61. Keith Blackburn & Dimitrios Varvarigos, 2008. "Human capital accumulation and output growth in a stochastic environment," Economic Theory, Springer, vol. 36(3), pages 435-452, September.
  62. Paul Gaggl & Sandra Steindl, 2007. "Business Cycles and Growth: A Survey," WIFO Working Papers 308, WIFO.
  63. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
  64. Ng, Yew-Kwang, 1992. "Business Confidence and Depression Prevention: A Mesoeconomic Perspective," American Economic Review, American Economic Association, vol. 82(2), pages 365-71, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:rim:rimwps:02_13. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dimitrios Vortelinos)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.