Download or read book Heterogeneous Firms and the Micro Origins of Aggregate Fluctuations written by Glenn Magerman and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Firms Destinations and Aggregate Fluctuations written by Julian Di Giovanni and published by . This book was released on 2014 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses a database covering the universe of French firms for the period 1990--2007 to provide a forensic account of the role of individual firms in generating aggregate fluctuations. We set up a simple multi-sector model of heterogeneous firms selling to multiple markets to motivate a theoretically-founded decomposition of firms' annual sales growth rate into different components. We find that the firm-specific component contributes substantially to aggregate sales volatility, mattering about as much as the components capturing shocks that are common across firms within a sector or country. We then decompose the firm-specific component to provide evidence on two mechanisms that generate aggregate fluctuations from microeconomic shocks highlighted in the recent literature: (i) when the firm size distribution is fat-tailed, idiosyncratic shocks to large firms directly contribute to aggregate fluctuations; and (ii) aggregate fluctuations can arise from idiosyncratic shocks due to input-output linkages across the economy. Firm linkages are approximately three times as important as the direct effect of firm shocks in driving aggregate fluctuations.
Download or read book Essays in Heterogeneity Irreversibility and Aggregate Fluctuations written by Julieta Caunedo and published by . This book was released on 2014 with total page 158 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Essays on Heterogeneity, Irreversibility and Aggregate Fluctuations" explores the connections between micro structure and technologies available to the agents operating in the economy and the dynamic of aggregate output and productivity. The thesis aims at further understanding the linkages between investment decisions of heterogeneous firms, the industry structure, and the aggregate dynamic of the economy. The hypothesis explored in this dissertation is that the dynamic of the industry structure, the patterns of selection of firms and investment within an industry bear information as of the efficiency with which the economy operates. The thesis consist of three essays organized in chapters. Chapter I, "Efficiency with Equilibrium Marginal Product Dispersion and Firm Selection" investigates conditions under which reductions in marginal product of capital dispersion induce Pareto improving allocations. The main result is that it is possible for allocations that display higher marginal product dispersion to be closer to the efficient one than allocations with lower marginal product dispersion. Chapter II, "Industry Dynamics, Investment and Business Cycles" investigates the quantitative implications of irreversibilities in investment for aggregate productivity. The main result of the essay is that for a calibrated economy to the US manufacturing sector, efficiency losses associated to firm selection are quantitatively more important than those associated to lower equilibrium dispersion in marginal products, i.e. capital reallocation. Chapter III, "Aggregate Fluctuations and the Industry Structure of the US Economy" documents changes in the input matrix of the US economy, and analyzes its implications for the relevance of sector specific and neutral shocks in aggregate fluctuations. The main finding is that an economy where the input output entries are allowed to fluctuate as in the data generates larger amplification of shocks and a stronger role for neutral shocks than a comparable economy with a fixed input output structure.
Download or read book Essays on Aggregate Fluctuations with Micro heterogeneity written by Tatsuro Senga and published by . This book was released on 2015 with total page 135 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the second chapter, "Default Risk and Aggregate Fluctuations in an Economy with Production Heterogeneity," with Aubhik Khan and Julia K. Thomas, I study an economy where firms have persistent differences in productivities, capital, and debt or financial assets. Investment is funded by retained earnings and non-contingent debt. Because firms may default on their loans, the unit cost of borrowing rises with the debt a firm undertakes and falls with its collateral. This drives an inefficient allocation of capital; on average, large firms with more collateral invest more than do small firms with less collateral. In response to a credit shock worsening firms' cash positions, the model predicts a sharp response consistent with several aspects of the 2007 U.S. recession. Measured TFP falls over several periods, as do employment, investment and GDP. The subsequent recovery is gradual given slow recoveries in TFP, aggregate capital, and the measure and distribution of firms. In the third chapter, "Uncertainty Shocks and Liquidity Crisis with Adverse Selection," I study the impact of uncertainty shocks in an economy with asymmetric information in the asset market. Firms are heterogeneous in productivity, and they finance investment by issuing long-term, non-contingent loans. Each lender underwrites and securitizes loans in a market where households participate as buyers without knowing the quality of underlying assets. This adverse selection problem worsens following a shock to the dispersion of firm productivity. Trading volumes and the prices for securitized loans fall, and this in turn adversely affects investment at the firm level.
Download or read book Firm Heterogeneity Endogenous Entry and the Business Cycle written by Gianmarco I. P. Ottaviano and published by . This book was released on 2011 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the role that the entry and exit of heterogeneous firms plays in shaping aggregate fluctuations in economic activity. In so doing, it develops a dynamic stochastic general equilibrium model in which procyclical entry and countercyclical exit along a real business cycle lead to endogenous cyclical movements in average firm productivity. These movements stem from a composition effect due to the reallocation of market shares among firms with different levels of efficiency and affect the propagation of exogenous technological shocks. Numerical analysis suggests that existing models with representative firms may overstate the actual role of procyclical entry and exit in imperfectly competitive markets as a propagation mechanism of exogenous technology shocks. The reason is that procyclical entry and countercyclical exit disproportionately involve less efficiency firms whose impact on aggregate economic activity is hampered by their smaller size -- National Bureau of Economic Research web site.
Download or read book Comparative Advantage and Heterogeneous Firms written by Andrew B. Bernard and published by . This book was released on 2006 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines how country, industry and firm characteristics interact in general equilibrium to determine nations' responses to trade liberalization. When firms possess heterogeneous productivity, countries differ in relative factor abundance and industries vary in factor intensity, falling trade costs induce reallocations of resources both within and across industries and countries. These reallocations generate substantial job turnover in all sectors, spur relatively more creative destruction in comparative advantage industries than comparative disadvantage industries, and magnify ex ante comparative advantage to create additional welfare gains from trade. The relative ascendance of high-productivity firms within industries boosts aggregate productivity and drives down consumer prices. In contrast with the neoclassical model, these price declines dampen and can even reverse the real wage losses of scarce factors as countries liberalize.
Download or read book The granular origins of aggregate fluctuations written by Xavier Gabaix and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: This paper proposes that idiosyncratic firm-level fluctuations can explain an important part of aggregate shocks, and provide a microfoundation for aggregate productivity shocks. Existing research has focused on using aggregate shocks to explain business cycles, arguing that individual firm shocks average out in aggregate. I show that this argument breaks down if the distribution of firm sizes is fat-tailed, as documented empirically. The idiosyncratic movements of the largest 100 firms in the US appear to explain about one third of variations in output and the Solow residual. This "granular" hypothesis suggests new directions for macroeconomic research, in particular that macroeconomic questions can be clarified by looking at the behavior of large firms. This paper's ideas and analytical results may also be useful to think about the fluctuations of other economic aggregates, such as exports or the trade balance
Download or read book Essays in Firm Dynamics Ownership and Aggregate Effects written by Henri Luomaranta and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Administrative registers maintained by statistical offices on vastly heterogeneous firms have much untapped potential to reveal details on sources of productivity of firms and economies alike. It has been proposed that firm-level shocks can go a long way in explaining aggregate fluctuations. Based on novel monthly frequency data, idiosyncratic shocks are able to explain a sizable share of the Finnish economic fluctuations, providing support to the granular hypothesis. The global financial crisis of 2007-2008 has challenged the field of economic forecasting, and nowcasting has become an active field. This thesis shows that the information content of firm-level sales and truck traffic can be used for nowcasting GDP figures, by using a specific mixture of machine learning algorithms. The agency problem lies at the heart of much of economic theory. Based on a unique dataset linking owners, CEOs and firms, and exploiting plausibly exogenous variations in the separation of ownership and control, agency costs seem to be an important determinant of firm productivity. Furthermore, the effect appear strongest in medium-sized firms. Enterprise group structures might have important implications on the voluminous literature on firm size, as large share of SME employment can be attributed to affiliates of large business groups. Within firm variation suggests that enterprise group affiliation has heterogeneous impacts depending on size, having strong positive impact on productivity of small firms, and negative impact on their growth. In terms of aggregate job creation, it is found that the independent small firms have contributed the most. The results in this thesis underline the benefits of paying attention to samples encompassing the total population of firms. Researchers should continue to explore the potential of rich administrative data sources at statistical offices and strive to strengthen the ties with data producers.
Download or read book The Network Origins of Aggregate Fluctuations written by Daron Acemoglu and published by . This book was released on 2011 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper argues that in the presence of intersectoral input-output linkages, microeconomic idiosyncratic shocks may lead to aggregate fluctuations. In particular, it shows that, as the economy becomes more disaggregated, the rate at which aggregate volatility decays is determined by the structure of the network capturing such linkages. Our main results provide a characterization of this relationship in terms of the importance of different sectors as suppliers to their immediate customers as well as their role as indirect suppliers to chains of downstream sectors. Such higher-order interconnections capture the possibility of "cascade effects" whereby productivity shocks to a sector propagate not only to its immediate downstream customers, but also indirectly to the rest of the economy. Our results highlight that sizable aggregate volatility is obtained from sectoral idiosyncratic shocks only if there exists significant asymmetry in the roles that sectors play as suppliers to others, and that the "sparseness" of the input-output matrix is unrelated to the nature of aggregate fluctuations. Keywords: business cycle, aggregate volatility, diversification, input-output linkages, intersectoral network, cascades. JEL Classifications: C67, D57, E32.
Download or read book Making It Big written by Andrea Ciani and published by World Bank Publications. This book was released on 2020-10-08 with total page 178 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic and social progress requires a diverse ecosystem of firms that play complementary roles. Making It Big: Why Developing Countries Need More Large Firms constitutes one of the most up-to-date assessments of how large firms are created in low- and middle-income countries and their role in development. It argues that large firms advance a range of development objectives in ways that other firms do not: large firms are more likely to innovate, export, and offer training and are more likely to adopt international standards of quality, among other contributions. Their particularities are closely associated with productivity advantages and translate into improved outcomes not only for their owners but also for their workers and for smaller enterprises in their value chains. The challenge for economic development, however, is that production does not reach economic scale in low- and middle-income countries. Why are large firms scarcer in developing countries? Drawing on a rare set of data from public and private sources, as well as proprietary data from the International Finance Corporation and case studies, this book shows that large firms are often born large—or with the attributes of largeness. In other words, what is distinct about them is often in place from day one of their operations. To fill the “missing top†? of the firm-size distribution with additional large firms, governments should support the creation of such firms by opening markets to greater competition. In low-income countries, this objective can be achieved through simple policy reorientation, such as breaking oligopolies, removing unnecessary restrictions to international trade and investment, and establishing strong rules to prevent the abuse of market power. Governments should also strive to ensure that private actors have the skills, technology, intelligence, infrastructure, and finance they need to create large ventures. Additionally, they should actively work to spread the benefits from production at scale across the largest possible number of market participants. This book seeks to bring frontier thinking and evidence on the role and origins of large firms to a wide range of readers, including academics, development practitioners and policy makers.
Download or read book Firm Dynamics and the Origins of Aggregate Fluctuations written by Andrea Stella and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Identifying Aggregate Shocks with Micro level Heterogeneity written by Xing Guo and published by . This book was released on 2020 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This paper identifies the aggregate financial shocks and quantifies their effects on business investment based on an estimated DSGE model with firm-level heterogeneity. On average, financial shocks contribute only 1.1% of the variation in U.S. public firms' aggregate investment. The negligible aggregate relevance of financial shocks mainly results from the interaction between firm-level heterogeneity and general equilibrium effects. Following a contractionary financial shock, financially constrained firms are directly forced to cut investment, which dampens the aggregate investment demand and lowers the capital good price. The lower capital good price motivates the financially unconstrained firms to invest more, which largely cancels out the financial shock's direct effect in aggregation. If the firm-level heterogeneity is removed, the implied relevance of financial shocks to aggregate investment will be 50 times larger. This sharp difference indicates that representative firm models could overstate the relevance of financial shocks in driving the business cycle fluctuation and highlights the importance of micro-level heterogeneity in identifying the aggregate shocks"--Abstract, page ii.
Download or read book Aggregate Productivity and Heterogeneous Firms written by Erling Holmøy and published by . This book was released on 2000 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Power Laws in Firm Size and Openness to Trade written by Mr.Andrei A. Levchenko and published by International Monetary Fund. This book was released on 2010-04-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Existing estimates of power laws in firm size typically ignore the impact of international trade. Using a simple theoretical framework, we show that international trade systematically affects the distribution of firm size: the power law exponent among exporting firms should be strictly lower in absolute value than the power law exponent among non-exporting rms. We use a dataset of French firms to demonstrate that this prediction is strongly supported by the data. While estimates of power law exponents have been used to pin down parameters in theoretical and quantitative models, our analysis implies that the existing estimates are systematically lower than the true values. We propose two simple ways of estimating power law parameters that take explicit account of exporting behavior.
Download or read book The Granular Origins of Macroeconomic Fluctuations in Europe written by Mr.Christian H Ebeke and published by International Monetary Fund. This book was released on 2017-11-07 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the microeconomic origins of aggregate economic fluctuations in Europe. It examines the relevance of idiosyncratic shocks at the top 100 large firms (the granular shocks) in explaining aggregate macroeconomic fluctuations. The paper also assesses the strength of spillovers from large firms onto SMEs. Using firm-level data covering over 14 million firms and eight european countries (Austria, Belgium, Finland, France, Germany, Italy, Portugal and Spain), we find that: (i) 40 percent of the variance in GDP in the sample can be explained by idiosyncratic shocks at large firms; (ii) positive granular shocks at large firms spill over to domestic SMEs’ output, especially if SMEs’ balance sheets are healthy and if SMEs belong to the services and manufacturing sectors.
Download or read book Monetary Policy Inflation and the Business Cycle written by Jordi Galí and published by Princeton University Press. This book was released on 2015-06-09 with total page 295 pages. Available in PDF, EPUB and Kindle. Book excerpt: The classic introduction to the New Keynesian economic model This revised second edition of Monetary Policy, Inflation, and the Business Cycle provides a rigorous graduate-level introduction to the New Keynesian framework and its applications to monetary policy. The New Keynesian framework is the workhorse for the analysis of monetary policy and its implications for inflation, economic fluctuations, and welfare. A backbone of the new generation of medium-scale models under development at major central banks and international policy institutions, the framework provides the theoretical underpinnings for the price stability–oriented strategies adopted by most central banks in the industrialized world. Using a canonical version of the New Keynesian model as a reference, Jordi Galí explores various issues pertaining to monetary policy's design, including optimal monetary policy and the desirability of simple policy rules. He analyzes several extensions of the baseline model, allowing for cost-push shocks, nominal wage rigidities, and open economy factors. In each case, the effects on monetary policy are addressed, with emphasis on the desirability of inflation-targeting policies. New material includes the zero lower bound on nominal interest rates and an analysis of unemployment’s significance for monetary policy. The most up-to-date introduction to the New Keynesian framework available A single benchmark model used throughout New materials and exercises included An ideal resource for graduate students, researchers, and market analysts
Download or read book World Trade Evolution written by Lili Yan Ing and published by Routledge. This book was released on 2018-10-08 with total page 442 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book provides theoretical and empirical evidence on how world trade evolves, how trade affects resource allocation, how trade competition affects productivity, how China shock affects world trade and how trade affects large and small countries. It is a useful reference which focuses on new approaches to international trade by looking into country-specific as well as firm-product level-specific cases.
