Klaus Wälde * Department of Economics * University of Würzburg * www.waelde.com

1. How it fits into the literature

Natural volatility in growing economies________________________________________________________________

growththeories

exogenousexplanation

Solow

okay!

endogenousexplanation

RomerLucasAghion HowittGrossman Helpman

fluctuations

RBC, sunspots

okay!okay!

growth and

fluctuations

endogenousexplanation

Bental and PeledMatsuyama

WäldeFrancois and Lloyd-Ellis

aha?!?

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2. Why do growing economies fluctuate?(see e.g. Bental und Peled 1996, Matsuyama 1999, Wälde 1999, 2002, 2005 Francois and Lloyd-Ellis 2003)

Klaus Wälde * Department of Economics * University of Würzburg * www.waelde.com

Natural volatility in growing economies________________________________________________________________

TFP grows in discrete steps rather than smoothly!

Growth models with exogenous or endogenous growth:TFP growth is smooth

Natural volatility:TFP growth turns out to follow a step function

•

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3. A Model (Posch and Wälde, 2005)

Klaus Wälde * Department of Economics * University of Würzburg * www.waelde.com

Natural volatility in growing economies

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Fig. 1a: Cyclical component Fig. 1b: Corresponding level of GDP

Klaus Wälde * Department of Economics * University of Würzburg * www.waelde.com

Natural volatility in growing economies

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Want more details?

See the survey and more references in:

http://www.wifak.uni-wuerzburg.de/vwl2/nv/NaturalVolatility.pdf

Thank you for your attention!