Entry and Exit with Financial Frictions

Patrick Macnamara

Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester

Abstract: This paper considers a model of firm dynamics to study how well aggregate shocks account for fluctuations in the entry and exit of establishments. To do this, I construct measures of aggregate financial and technology shocks. Under reasonable parameters, the model indicates that financial shocks (and not technology shocks) have contributed to the majority of cyclical fluctuations in entry and exit rates. In particular, the reduction in entry and the increase in exit during the 2007-09 recession have contributed to the slow recovery of output and hours that followed.

Pages: 46 pages
Date: 2014
New Economics Papers: this item is included in nep-cfn, nep-dge and nep-sbm
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:man:cgbcrp:193

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