Skewed Business Cycles

Sergio Salgado Ibáñez, Fatih Guvenen and Nicholas Bloom

No 26565, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using Census and Compustat firm panel data, we show that the skewness of four measures — the growth rate of sales, employment, productivity, and firm value — is robustly procyclical. All four display a fat left tail of large negative outcomes during recessions and a compressed right tail. This holds across US industries and over 60 countries. Using a firm dynamics model with adjustment costs, risk aversion, and financial frictions solved in general equilibrium, we analyze the impact of first-, second-, and third-moment shocks. A second-moment shock generates a sharp downturn followed by a rapid recovery, whereas concentrating the same total variance in the left tail—a negative third-moment shock—produces a persistent recession matching the depth and slow recovery observed in US data. Modeling recessions as a combination of negative first-moment, positive second-moment, and negative third-moment shocks is critical to match both the cross-sectional moments of firm growth and the aggregate response to recessions.

JEL-codes: E3 (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-bec, nep-dge, nep-ent, nep-mac and nep-ore
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40)

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Related works:
Working Paper: Skewed Business Cycles (2019)
Working Paper: Skewed Business Cycles (2016)
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