Medium-term fluctuations and the "Great Ratios" of economic growth
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Medium-term fluctuations and the "Great Ratios" of economic growth. / Groth, Christian; Madsen, Jakob B.
In: Journal of Macroeconomics, Vol. 49, 10.07.2016, p. 149-176.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - Medium-term fluctuations and the "Great Ratios" of economic growth
AU - Groth, Christian
AU - Madsen, Jakob B.
N1 - JEL Classification: E32; G11; O41
PY - 2016/7/10
Y1 - 2016/7/10
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. For plausible values of the elasticity of factor substitution real wage sluggishness creates damped internal oscillations in the endogenous variables. Thereby hump-shaped responses to a variety of shocks arise.
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. For plausible values of the elasticity of factor substitution real wage sluggishness creates damped internal oscillations in the endogenous variables. Thereby hump-shaped responses to a variety of shocks arise.
KW - Faculty of Social Sciences
KW - E32
KW - G11
KW - O41
U2 - 10.1016/j.jmacro.2016.07.001
DO - 10.1016/j.jmacro.2016.07.001
M3 - Journal article
VL - 49
SP - 149
EP - 176
JO - Journal of Macroeconomics
JF - Journal of Macroeconomics
SN - 0164-0704
ER -
ID: 164572558