Aggregate business failures and macroeconomic conditions: A VAR look at the U.S. between 1980 and 2004

Jin Zhang, David Bessler () and David Leatham ()

Journal of Applied Economics, 2013, vol. 16, 179-202

Abstract: In this paper, we study the U.S. aggregate business failures during 1980- 2004 in relation to four macroeconomic variables: aggregate corporate profits, the producer price index, the interest rate, and stock market performance. We argue that aggregate business failures should not be treated as a passive variable, as usually done in previous studies, and we allow its possible causal effect on other macroeconomic variables through a Structural Vector Autoregression model that builds on Directed Acyclic Graphs. Granger type causality and innovation accounting results both show that while subject to the influence of interest rates, aggregate business failures are quite exogenous in comparison to the other three variables. The implications of these findings are discussed as well.

Keywords: business failures; macroeconomic conditions; directed acyclic graphs; vector autoregression (search for similar items in EconPapers)
JEL-codes: C32 E51 G33 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:cem:jaecon:v:16:y:2013:n:1:p:179-202

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