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

Barbara Annicchiarico (), Luisa Corrado () and Alessandra Pelloni ()

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

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.

Keywords: Growth; Volatility; Monetary and Real Shocks; Labour Supply Elasticity; Second-Order Approximation Methods. (search for similar items in EconPapers)
JEL-codes: O42 C63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge
Date: 2008-04
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Working Paper: Long-Term Growth and Short-Term Volatility: The Labour Market Nexus (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:cam:camdae:0823

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