Aggregate fluctuations and the cross-sectional dynamics of firm growth

Sean Holly, Ivan Petrella and Emiliano Santoro

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: This paper argues that important insights into the business cycle can be obtained by exploring the micro-structure of macroeconomic fluctuations. We fit firm-level growth data with the Asymmetric Exponential Power density, which accounts for asymmetric dispersion and kurtosis on either side of the modal rate. Three novel results are reported. First, firms in the left side of the distribution, that is firms that are growing more slowly or declining, are typically more responsive to aggregate shocks than those in the right side of the distribution. Second, trending behavior in the volatility of firm growth is predominantly driven by increasing dispersion in the growth of highly performing .rms. Last, we deliver evidence in support of the view that shifts in the probability mass on either side of the mode may act as important propagators of business fluctuations. The analysis points to .financial frictions as one of the mechanisms capable of inducing non-linear micro adjustment consistent with both aggregate and cross-sectional dynamics.

Date: 2011-01
New Economics Papers: this item is included in nep-bec and nep-mic
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://lirias.kuleuven.be/bitstream/123456789/305754/1/DPS1106.pdf

Related works:
Journal Article: Aggregate fluctuations and the cross-sectional dynamics of firm growth (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces11.06

Access Statistics for this paper

More papers in Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven
Bibliographic data for series maintained by library EBIB ().