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Author: Vasco M. Carvalho Publisher: ISBN: Category : Business cycles Languages : en Pages : 0
Book Description
Do large firm dynamics drive the business cycle? We answer this question by developing a quantitative theory of aggregate fluctuations caused by firm-level disturbances alone. We show that a standard heterogeneous firm dynamics setup already contains in it a theory of the business cycle, without appealing to aggregate shocks. We offer a complete analytical characterization of the law of motion of the aggregate state in this class of models -- the firm size distribution -- and show that the resulting closed form solutions for aggregate output and productivity dynamics display: (i) persistence, (ii) volatility and (iii) time-varying second moments. We explore the key role of moments of the firm size distribution -- and, in particular, the role of large firm dynamics -- in shaping aggregate fluctuations, theoretically, quantitatively and in the data.
Author: Vasco M. Carvalho Publisher: ISBN: Category : Business cycles Languages : en Pages : 0
Book Description
Do large firm dynamics drive the business cycle? We answer this question by developing a quantitative theory of aggregate fluctuations caused by firm-level disturbances alone. We show that a standard heterogeneous firm dynamics setup already contains in it a theory of the business cycle, without appealing to aggregate shocks. We offer a complete analytical characterization of the law of motion of the aggregate state in this class of models -- the firm size distribution -- and show that the resulting closed form solutions for aggregate output and productivity dynamics display: (i) persistence, (ii) volatility and (iii) time-varying second moments. We explore the key role of moments of the firm size distribution -- and, in particular, the role of large firm dynamics -- in shaping aggregate fluctuations, theoretically, quantitatively and in the data.
Author: João Ayres Publisher: ISBN: Category : Languages : en Pages :
Book Description
We use firm dynamics statistics on employment by age, entry, exit, and job flows to identify sources of business cycle fluctuations in the U.S. economy since 1980. We extend the Hopenhayn (1992) firm dynamics model by incorporating capital and debt accumulation to the firm's problem and savings to the consumer's problem. Analyzing the implications of unexpected productivity, credit, labor wedge, and investment wedge shocks for firm dynamics statistics, we show that (a) productivity shock accounts for the 1990-91 and 2001 recessions, and (b) productivity and credit shocks jointly account for the 1980-82 and 2007-09 recessions.
Author: Cihan Artunç Publisher: ISBN: Category : Languages : en Pages : 71
Book Description
This paper explores how macroeconomic conditions affect firm dynamics in Egypt between 1911 and 1948 by constructing an extensive dataset of all companies ever founded in this period. By exploiting Egyptian economy's specialization in cotton exports, I use fluctuations in the world price of cotton to identify the direct impact of the business cycle on firm entry, exit, and growth. The analysis shows that growth occurred primarily at the extensive margin. Firm entry was procyclical but exit and growth were both acyclical. The new evidence reveals cyclical selection into entry. Booms systematically selected low quality entrants, which were smaller, less likely to grow after entry, and frailer than other cohorts. Bust cohorts were larger, more likely to grow, and more robust. The quality differences were persistent over the firms' lifecycles. These new findings support a theory of firm dynamics with ex-ante heterogeneous firms, permanent productivity differences between cohorts, and economic adjustment through the extensive margin of entry.
Author: Christian Saborowski Publisher: International Monetary Fund ISBN: 149831113X Category : Business & Economics Languages : en Pages : 25
Book Description
This paper examines the variation in life cycle growth across the universe of Mexican firms. We establish two stylized facts to motivate our analysis: first, we show that firm size matters for development by illustrating a close correlation with state-level per capita incomes. Second, we show that few firms grow as much as their U.S. peers while the majority stagnates at less than twice their initial size. To gain insights into the distinguishing characteristics of the two groups, we then econometrically decompose life cycle growth across firms. We find that firms that have financial access and multiple establishments and that are formal, part of diversified industries and located in population centers can grow at sizeable rates.
Author: Sara Moreira Publisher: ISBN: Category : Languages : en Pages : 89
Book Description
This paper examines how the state of the economy when businesses begin operations affects their size and performance over the lifecycle. Using micro-level data that covers the entire universe of businesses operating in the U.S. since the late 1970s, I provide new evidence that businesses born in downturns start on a smaller scale and remain smaller over their entire lifecycle. In fact, I find no evidence that these differences attenuate even long after entry. Using new data on the productivity and composition of startup businesses, I show that this persistence is related to selection at entry and demand-side channels. In order to evaluate the relative importance of these two mechanisms, I build a model of firm dynamics that includes aggregate shocks, idiosyncratic productivity, and a demand accumulation process. When I mute the effects of selection mechanisms, I find that the average initial size differences are more procyclical, but they are less persistent over time. Finally, I use the model to quantitatively evaluate the role of the persistent effects of entry conditions in the propagation of the Great Recession. My model simulations indicate that the impact of the crisis on the 2008-2009 cohorts reduces aggregate employment by at least one percentage point in the following ten years.
Author: Ms.Valerie Cerra Publisher: International Monetary Fund ISBN: 1513536990 Category : Business & Economics Languages : en Pages : 50
Book Description
Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.
Author: Richard Audoly Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
I build a tractable random search model with firm dynamics, on-the-job search, and aggregate shocks. Multi-worker firms make recruitment decisions, choose whether to enter or exit the market, and design wage contracts. Tractability is obtained by showing that, under a set of assumptions on the recruitment technology, the decisions of workers and firms can be expressed in terms of the firms' current productivity. I introduce a numerical solution method to accommodate aggregate shocks in this environment and show that the model can replicate salient features of both firm-level data on productivity and employment and aggregate time series describing the business cycle. I use this framework to quantify the drivers of worker reallocation over the recent business cycle in Britain.
Author: Publisher: ISBN: Category : Languages : en Pages : 28
Book Description
We use the Generalized Dynamic Factor Model proposed by Forni et al. [2000] in order to study the dynamics of the rate of growth of output and investment and establish stylized facts of business cycles. By using quarterly firm level data relative to 660 US firms for 20 years, we investigate the number and the features of the underlying forces leading economic growth: evidence suggests the main shock to be the same across sectors and for the economy as a whole. Moreover, we disentangle the component of industrial dynamics which is due to economy-wide factors, the common component, from the component which relates to sectoral or firm-specific phenomena, the idiosyncratic component. We assess the relative importance of these two components at different frequencies and compare common components across sectors. Finally, we investigate the comovements of the common component of output and investment series both at firm level and at sectoral level. -- Dynamic Factor Analysis ; Business Cycle ; Comovements
Author: Vasco M. Carvalho
Author: Vasco M. Carvalho
Author: João Ayres
Author: 
Author: Cihan Artunç
Author: Christian Saborowski
Author: Sara Moreira
Author: Ms.Valerie Cerra
Author: Vivek Ghosal
Author: Richard Audoly
Author: