Business Cycle Variability and Growth Linkage

This study contributes in bridging the dichotomy between economic growth and business cycle paradigms by providing dynamic characterisation of the link between economic growth, risk aversion, uncertainty and variability in industrial production, consumption and investment. In a system of equations, the study reveals that risk aversion, uncertainty and variability of business cycle components aid to contract growth. In contrast, ambiguous relationship exists between variability of hours worked and economic growth. Uncertainty and risk aversion induce increment in variability of business cycle components. Across countries, economic growth remains sensitive to the level of risk aversion and uncertainty