The paper presents a new empirical regularity between the volatility of productivity growth and long-run unemployment …

volatility and growth. We first develop a simple growth model where firms engage in two types of investment: a short-term one and …, thus mitigating volatility. But when firms face tight credit constraints, long-term investment turns procyclical, thus … amplifying volatility. Tighter credit therefore leads to both higher aggregate volatility and lower mean growth for a given total …