Working Paper: CEPR ID: DP1779
Authors: Jean-Pierre Danthine; John B. Donaldson; Thore Johnsen
Abstract: The objective of this paper is to provide, in the context of a dynamic general equilibrium model, an answer to the following five questions: 1) To what extent does an economy subject to regular variations in labour productivity growth differ from one where labour productivity is constant? 2) What is the impact on major macroeconomic indicators of a one-time change in labour productivity growth? 3) What are the business cycle implications of autonomous (non-falsifiable) changes in growth expectations? 4) What is the potential of such expectation changes for explaining the volatility of consumption to output ratio? 5) Can autonomous changes in growth expectations help us understand recent business cycle episodes?
Keywords: business cycle; labour productivity; consumption
JEL Codes: E1; E2; E3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| labor productivity growth (O49) | aggregate investment (E22) |
| labor productivity growth (O49) | output growth (O40) |
| autonomous changes in growth expectations (O49) | macroeconomic variations (E39) |
| changing expectations (D84) | volatility of consumption to output ratio (E20) |
| changes in consumer confidence (D12) | labor supply (J20) |
| changes in consumer confidence (D12) | investment decisions (G11) |