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

27 Pages Posted: 21 Apr 2011

See all articles by Barbara Annicchiarico

Barbara Annicchiarico

University of Rome, Tor Vergata - Department of Economics and Finance; University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS)

Luisa Corrado

University of Rome Tor Vergata Department of Economics and Finance

Alessandra Pelloni

University of Rome II, Department of Economics

Date Written: June 2011

Abstract

We study the relationship between growth and variability in a growth DSGE model with nominal rigidities and learning-by-doing. We show this relationship may be positive or negative depending on the source of fluctuations. A key role is played by labour market features. We find that monetary shocks volatility will generally have a negative effect on growth, while the opposite is true for fiscal and productivity shocks. These findings are consistent with empirical evidence, as data show an ambiguous relationship between output growth and its variance, but a negative relationship between output growth and nominal variability.

Suggested Citation

Annicchiarico, Barbara and Corrado, Luisa and Pelloni, Alessandra, Long-Term Growth and Short-Term Volatility: The Labour Market Nexus (June 2011). The Manchester School, Vol. 79, pp. 646-672, 2011. Available at SSRN: https://ssrn.com/abstract=1817153 or http://dx.doi.org/10.1111/j.1467-9957.2010.02180.x

Barbara Annicchiarico

University of Rome, Tor Vergata - Department of Economics and Finance ( email )

Rome, I-00133
Italy

University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS) ( email )

Via Columbia, 2
Rome, I-00133
Italy

Luisa Corrado

University of Rome Tor Vergata Department of Economics and Finance ( email )

Via Columbia n.2
Rome, rome 00100
Italy

Alessandra Pelloni

University of Rome II, Department of Economics ( email )

Via Columbia n.2
Rome, rome 00100
Italy
390672595908 (Phone)

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