 Multi-product firms and business cycle dynamicsAntonio Minniti and Francesco Turino European Economic Review, 2013, vol. 57, issue C, 75-97 Abstract: Recent empirical evidence provided by Bernard et al. (2010) and Broda and Weinstein (2010) shows that a significant share of product creation and destruction in U.S. industries occurs within existing firms and accounts for an important share of aggregate output. In the present paper, and consistent with this evidence, we relax the standard assumption of mono-product firms in a dynamic stochastic general equilibrium model. Our analysis is based on a model of firm dynamics with two deviations from the conventional real business cycle framework—imperfect competition with endogenous entry and multi-product firms. The combination of these two features enables our model to successfully generate a mechanism that accounts for the strong procyclicality of product creation. Due to the proliferation effect induced by firm-level adjustments in product scope, we show that our model embodies a quantitatively important magnification mechanism of aggregate shocks. Keywords: Multi-product firms; Business cycles; Firm dynamics (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:57:y:2013:i:c:p:75-97 DOI: 10.1016/j.euroecorev.2012.10.008 Access Statistics for this article European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer More articles in European Economic Review from Elsevier |
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