Medium-term fluctuations and the "Great Ratios" of economic growth
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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.
Original language | English |
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Journal | Journal of Macroeconomics |
Volume | 49 |
Pages (from-to) | 149-176 |
Number of pages | 28 |
ISSN | 0164-0704 |
DOIs | |
Publication status | Published - 10 Jul 2016 |
Bibliographical note
JEL Classification: E32; G11; O41
- Faculty of Social Sciences - E32, G11, O41
Research areas
ID: 164572558