We examine how credit constraints affect the cyclical behavior of productivity-enhancing investment and thereby volatility and growth. We first develop a simple growth model where firms engage in two types of investment: a short-term one and a long-term productivity-enhancing one. Because it...

It is common practice to estimate the volatility-growth link by specifying a standard growth equation such that the variance of the error term appears as an explanatory variable in this growth equation. The variance in turn is modelled by a second equation. Hardly any of existing applications of...

The paper examines the long-run fluctuations in growth and distribution through the prism of wage-and profit-led growth. We argue that the relation between distribution of income and growth changes over time. We propose an endogenous mechanism that leads to fluctuations between wage- and...

Countries with more developed financial markets (as measured by the private debt-to-GDP ratio) tend to have significantly lower aggregate volatility. This relationship is also highly non-linear starting from a low level of financial development the reduction in aggregate volatility by financial...

The paper examines the long-run fluctuations in growth and distribution through the prism of wage- and profit-led growth. We argue that the relation between distribution of income and growth changes over time. We propose an endogenous mechanism that leads to fluctuations between wage- and...

The paper examines changes in the Bulgarian economy following the global financial and economic crisis of 2008. The discussion is primarily based on the behavior of economic agents in the crisis – households and companies. The paper also seeks to address the changes in the external and fiscal...

We extract expectations about future economic growth from firms' cross-border merger and acquisition (M&A) announcements, and show they predict changes in economic growth rates and foreign exchange rate returns. The predictability is driven by the cross-border M&A announcements of cyclical...

Empirical studies showed that firm-level volatility has been increasing but the aggregate volatility has been decreasing in the US for the post-war period. This paper proposes a unified explanation for these diverging trends. Our explanation is based on a story of financial development -...