EconPapers    
Economics at your fingertips  
 

Large Firm Dynamics and the Business Cycle

Vasco Carvalho () and Basile Grassi ()

American Economic Review, 2019, vol. 109, issue 4, 1375-1425

Abstract: 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 an analytical characterization of the law of motion of the aggregate state in this class of models, the firm size distribution, and show that 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.

JEL-codes: D21 D22 D24 E32 L11 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/aer.20151317
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/aer.20151317 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... HSDYPdQJAqzZuEqK95kK (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... VkbzbbpHtFW5euztSjt_ (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... Cvi4BHe1HYM7cdFARVpW (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Large Firm Dynamics and the Business Cycle (2016) Downloads
Working Paper: Large Firm Dynamics and the Business Cycle (2015) Downloads
Working Paper: Large Firm Dynamics and the Business Cycle (2015) Downloads
Working Paper: Large firm dynamics and the business cycle (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:109:y:2019:i:4:p:1375-1425

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

 
Page updated 2019-12-06
Handle: RePEc:aea:aecrev:v:109:y:2019:i:4:p:1375-1425