Volatility, Growth and Labour Elasticity

Barbara Annicchiarico (), Luisa Corrado and Alessandra Pelloni

Working Paper series from Rimini Centre for Economic Analysis

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: C63 E30 O42 (search for similar items in EconPapers)
Date: 2008-01
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:32_08

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