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Explaining the Persistent Effect of Demand Uncertainty on Firm Growth

Timothee Gigout and Jean-Charles Bricongne ()

MPRA Paper from University Library of Munich, Germany

Abstract: We study the effect of demand uncertainty on firm growth. We use product-level bilateral trade data to build an exogenous firm-level measure of the uncertainty of demand shocks. We match it with exhaustive custom and fiscal data between 1996 and 2013. An increase in uncertainty has a negative and persistent impact on the growth of exposed firms. This suggests a different underlying mechanism from a simple real-option effect. Financially constrained firms experience a much sharper and longer slowdown. Sectoral comovement is also a key factor explaining the persistent effect of uncertainty.

Keywords: Uncertainty; demand shock; Firm-level; Dynamics; Heterogeneity. (search for similar items in EconPapers)
JEL-codes: D22 D81 F23 F61 (search for similar items in EconPapers)
Date: 2019-05-01
New Economics Papers: this item is included in nep-bec
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