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    Structural booms

    Phelps, E.S. and Zoega, Gylfi (2001) Structural booms. Economic Policy 16 (32), pp. 85-126. ISSN 0266-4658.

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    The paper proposes a new interpretation of long swings in economic activity. Instead of deviations from a trend growth path explained by misperceptions, long swings are seen as detours in the path itself provoked by rare and deep changes in expectations of future productivity. And such changes are approximately captured by swings in stock markets. In a large sample of OECD countries, the paper finds long‐term historical relationships between share prices and employment or the rate of unemployment. The results suggest that the recent strength of a nation’s stock markets and the responsiveness of employment are related to its institutions. In particular, corporatist institutions are likely to impede or obstruct entrepreneurs from taking advantage of expected productivity improvements. In contrast, a well‐developed stock market – in addition to a young, well‐educated labour force – may help both in the creation of profit opportunities as well as in enabling and emboldening firms to increase hiring.


    Item Type: Article
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Depositing User: Sarah Hall
    Date Deposited: 08 Dec 2020 09:45
    Last Modified: 02 Aug 2023 18:06


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