This paper examines relationships among economic growth, business cycles, and unemployment in a general-equilibrium model. The model views creative destruction as a major source of business cycles, as well as of long-term growth. I show that the expected growth rate negatively relates to the amplitude of business cycles, but positively relates to the expected unemployment rate. I also present an alternative view to competitive-equilibrium business cycle models on the relationship between employment and productivity. Contrary to competitive-equilibrium business cycle models, this model shows that positive permanent shocks cause unemployment, but positive transitory shocks lead to full employment. These theoretical results are consistent with empirical evidence. Finally, I show that an increase in the expected growth rate has a negative connection with the frequency of recessions.
Hori et al. (Thu,) studied this question.