Medium-term Fluctuations and the "Great Ratios" of Economic Growth

Christian Groth () and Jakob Madsen

No 13-16, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: Evidence for the OECD countries show that the “great ratios”, such as the unemployment rate, factor shares, Tobin’s q and the investment-capital ratio, fluctuate significantly on medium-term frequencies of 10-40 years duration. To explain these medium-term fluctuations, we establish a macro-dynamic model where the q-theory of investment is combined with sluggish real-wage adjustment in the labour market. In this framework, responses to shocks show persistence and amplification. A high degree of real-wage rigidity combined with a low elasticity of factor substitution leads to damped internal oscillations and hump-shaped impulse-response functions.

Keywords: Medium-term cycles; Tobin’s q; real-wage Phillips curve; elasticity of factor substitution; endogenous oscillations (search for similar items in EconPapers)
JEL-codes: E3 G1 O4 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2013
New Economics Papers: this item is included in nep-fdg, nep-gro and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.econ.ku.dk/english/research/publications/wp/dp_2013/1316.pdf/ (application/pdf)

Related works:
Journal Article: Medium-term fluctuations and the “Great Ratios” of economic growth (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:1316

Access Statistics for this paper

More papers in Discussion Papers from University of Copenhagen. Department of Economics Oester Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Hoffmann ().