Financial Fragility, Heterogeneous Firms and the Cross Section of the Business Cycle

Sean Holly and Emiliano Santoro

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: There is growing evidence that the cross section of the growth rate of firms is subject to systematic distortions at business cycle frequencies. In this paper we briefly review this evidence and then offer a theoretical model that incorporates nonlinearities in the way in which firms respond to aggregate and ideosyncratic shocks. We are able to replicate the most commonly found regularity - skewness in the cross section is counter-cyclical - and show that the strength of this relationship varies with the extent of financial fragility.

Keywords: Cross Sectional Business Cycle; Financial Fragility; Corporate Growth. (search for similar items in EconPapers)
JEL-codes: E22 E24 (search for similar items in EconPapers)
Date: 2008-09
New Economics Papers: this item is included in nep-bec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Financial Fragility, Heterogeneous Firms and the Cross Section of the Business Cycle (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:0846

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