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

TY - UNPB

T1 - Medium-term Fluctuations and the 'Great Ratios' of Economic Growth

AU - Groth, Christian

AU - Madsen, Jakob Brøchner

N1 - JEL Classification: E3, G1, O4

PY - 2013

Y1 - 2013

N2 - 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

AB - 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

KW - Faculty of Social Sciences

KW - Medium-term cycles

KW - Tobin’s q

KW - real-wage Phillips curve

KW - elasticity of factor substitution

KW - endogenous oscillations

M3 - Working paper

T3 - University of Copenhagen. Institute of Economics. Discussion Papers (Online)

BT - Medium-term Fluctuations and the 'Great Ratios' of Economic Growth

PB - Økonomisk institut, Københavns Universitet

CY - Kbh.

ER -