Firm dynamics in news-driven business cycles: the role of endogenous survival rate

Haichao Fan and Zhiwei Xu ()

Applied Economics, 2014, vol. 46, issue 15, 1767-1777

Abstract: Evidences from the structural vector-error correction model shows that the new business formation and stock prices co-moves with output under news shocks. However, simply incorporating firm dynamics into Jaimovich and Rebelo's (Jaimovich and Rebelo, 2009) model cannot explain these empirical findings. We show that this problem can be resolved by introducing endogenous survival rates for the new entrants.

Date: 2014
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Working Paper: Firm Dynamics in News Driven Business Cycle: The Role of Endogenous Survival Rate (2011)
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DOI: 10.1080/00036846.2014.884701

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