Endogenous Business Cycles with Small and Large Firms

Qazi Haque, Oscar Pavlov and Mark Weder ()
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Mark Weder: Aarhus University

School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: Recent decades have seen a rise in the market power of large firms. We propose a theory in which their technology involves the ability to produce multiple products. Large firms interact with smaller competitors and market share reallocations via product creation generate heterogeneous markup dynamics across the firm types. Higher market shares of large firms increase the parameter space for macroeconomic indeterminacy. Bayesian estimation of the general equilibrium model suggests the importance of the endogenous amplification of the product creation channel and animal spirits play a non-trivial role in driving U.S. business cycles.

Keywords: Indeterminacy; business cycles; multi-product firms; animal spirits; Bayesian estimation. (search for similar items in EconPapers)
Date: 2025-04
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Working Paper: Endogenous Business Cycles with Small and Large Firms (2025)
Working Paper: Endogenous Business Cycles with Small and Large Firms (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:adl:wpaper:2025-04

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