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Company bankruptcies and births matter

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  • John Hudson

Abstract

This paper constructs a simple supply orientated model of the economy in which company bankruptcies which lead to a loss of capital and births have impacts on macroeconomic variables. Bankruptcies will reduce output, increase unemployment, worsen the balance of payments and also impact upon inflation. Empirical work based on data from both the USA and the UK finds a significant Granger causality relationship between bankruptcies and births and these four macroeconomic variables. The standard Granger causality regression is supplemented by non-linear Granger causality tests.

Suggested Citation

  • John Hudson, 1997. "Company bankruptcies and births matter," Applied Economics, Taylor & Francis Journals, vol. 29(5), pages 647-654.
    • Handle: RePEc:taf:applec:v:29:y:1997:i:5:p:647-654
    DOI: 10.1080/000368497326840
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    References listed on IDEAS

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    1. Goudie, A.W. & Meeks, G., 1988. "Export And Die: The Exchange Rate And Company Failure In A Macro-Micro Model," Cambridge Working Papers in Economics 885, Faculty of Economics, University of Cambridge.
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    Cited by:

    1. Henry, Jérôme & Zimmermann, Maik & Leber, Miha & Kolb, Markus & Grodzicki, Maciej & Amzallag, Adrien & Vouldis, Angelos & Hałaj, Grzegorz & Pancaro, Cosimo & Gross, Marco & Baudino, Patrizia & Sydow, , 2013. "A macro stress testing framework for assessing systemic risks in the banking sector," Occasional Paper Series 152, European Central Bank.
    2. Henryk Gurgul & Paweł Zając, 2014. "The impact of alterations in the local insolvency legislation on business bankruptcy rates in Poland," Statistics in Transition new series, Główny Urząd Statystyczny (Polska), vol. 15(3), pages 453-466, June.
    3. Nico Dewaelheyns & Cynthia Hulle, 2008. "Legal reform and aggregate small and micro business bankruptcy rates: evidence from the 1997 Belgian bankruptcy code," Small Business Economics, Springer, vol. 31(4), pages 409-424, December.
    4. ben Jabeur, Sami & Mefteh-Wali, Salma & Carmona, Pedro, 2021. "The impact of institutional and macroeconomic conditions on aggregate business bankruptcy," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 108-119.

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