Productivity Growth and Volatility: How Important are Wage and Price Rigidities?

Annicchiarico BarbaraPelloni Alessandra
CEIS Research Paper
We study the implications of having different sources of nominal rigidities on the relationship between productivity growth and shocks volatility in a model with procyclical R&D and imperfect competition in goods and labour markets. We show that the effects of uncertainty on long-term growth not only depends on the source of fluctuations, as recent literature shows, but also, and crucially, on whether prices and/or wages are rigid.
Number: 211
Keywords: Productivity growth, volatility, nominal rigidities, uncertainty
JEL codes: E32, E52, O42
Date: Monday 26 September 2011
Revision Date: Monday 26 September 2011