DP1642 | Business Cycles and Long-run Growth

Author(s)

Publication Date

30/05/1997

JEL Code(s)

Keyword(s)

Programme Area(s)

Abstract

This survey discusses the effect of macroeconomic fluctuations on long-run growth from both a theoretical and empirical perspective. It emphasizes the ?opportunity cost? approach, which states that firms will intertemporally substitute productivity-enhancing activities for regular production activity during recessions. It provides aggregate evidence in favour of the opportunity cost approach.