Entry, Exit, Firm Dynamics, and Aggregate Fluctuations

Gian Luca Clementi and Berardino Palazzo

American Economic Journal: Macroeconomics, 2016, vol. 8, issue 3, 1-41

Abstract: Firm entry and exit amplify and propagate the effects of aggregate shocks, leading to greater persistence and unconditional variation of aggregate quantities. Following a positive aggregate shock, entry rises. As in the data, entrants are small and their initial impact on aggregate dynamics is negligible. However, as the common productivity component reverts to its unconditional mean, the youngsters that survive grow larger, generating a wider and longer expansion than in a scenario without entry or exit. The model also identifies a causal link between the drop in establishments at the outset of the Great Recession and the subsequent slow recovery.

JEL-codes: D21 D92 E22 E24 E32 G31 L11 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/mac.20150017
References: Add references at CitEc
Citations: View citations in EconPapers (171)

Downloads: (external link)
https://www.aeaweb.org/articles?id=10.1257/mac.20150017 (application/pdf)
https://www.aeaweb.org/aej/mac/data/0803/2015-0017_data.zip (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... hQzKY2vcfpubJYWsYnWT (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Entry, Exit, Firm Dynamics, and Aggregate Fluctuations (2013)
Working Paper: Entry, Exit, Firm Dynamics, and Aggregate Fluctuations (2010)
Working Paper: Entry, Exit, Firm Dynamics, and Aggregate Fluctuations (2010)
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:aejmac:v:8:y:2016:i:3:p:1-41

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

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

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