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The Business Cycle, Macroeconomic Shocks and the Cross Section: The Growth of UK Quoted Companies

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Author Info
Higson, C.
Holly, S.
Kattuman, P.
S. Platis

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Abstract

Co-movements and correlations in the major macroeconomic aggregates has been the focus of much recent literature in business cycle research. In this paper we provide another dimension to business cycle analysis. We examine the evolution of the cross sectional distribution of the growth rates of UK quoted companies from 1968 to 1997 and find correlations between aggregate business cycle fluctuations and the higher moments of the cross sectional distribution of growth rates. To explain this we analyse the sensitivity of firms to aggregate shocks, conditioning growth on firm size, age and industry. We find that the contemporaneous effects of aggregate shocks, both positive and negative, are significantly more pronounced for firms in the interior of growth rate range. This explains cycle-related patterns in the dynamics of the moments of the growth rate cross section. These findings are of importance in understanding firm level as well as business cycle dynamics.

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Publisher Info
Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0114.

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Length: 26
Date of creation: Nov 2001
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Handle: RePEc:cam:camdae:0114

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Related research
Keywords: business cycles; cross sectional moments; firm growth;

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  3. Jonathan McCarthy & Egon Zakrajsek, 1998. "Microeconomic inventory adjustment and aggregate dynamics," Staff Reports 54, Federal Reserve Bank of New York. [Downloadable!]
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  4. John C. Haltiwanger, 1997. "Measuring and analyzing aggregate fluctuations: the importance of building from microeconomic evidence," Review, Federal Reserve Bank of St. Louis, issue May, pages 55-78. [Downloadable!]
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  6. Jared Bernstein & Andrew Harvey, 2000. "Measurement and Testing of Inequality from Time Series of Deciles with an Application to U.S. Wages," Econometric Society World Congress 2000 Contributed Papers 0861, Econometric Society. [Downloadable!]
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  7. Zoltan Acs & David Audretsch, 1990. "Innovation and Small Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011131.
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  15. Caballero, Ricardo J & Engel, Eduardo M R A & Haltiwanger, John, 1997. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," American Economic Review, American Economic Association, vol. 87(1), pages 115-37, March. [Downloadable!] (restricted)
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  16. Boeri, Tito & Bellmann, Lutz, 1995. "Post-entry behaviour and the cycle: Evidence from Germany," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 483-500, December. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Sean Holly & Emiliano Santoro, 2007. "Financial Fragility, Heterogeneous Firms and the Cross Section of the Business Cycle," Money Macro and Finance (MMF) Research Group Conference 2006 96, Money Macro and Finance Research Group. [Downloadable!]
    Other versions:
  2. Döpke, J. & Funke, M. & Holly, S. & Weber, S., 2008. "The Cross-Section of Output and Inflation in a Dynamic Stochastic General Equilibrium Model with Sticky Prices," Cambridge Working Papers in Economics 0853, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  3. Harald Oberhofer, 2009. "Firm growth, European industry dynamics and domestic business cycles," Working Papers 2009-18, Faculty of Economics and Statistics, University of Innsbruck. [Downloadable!]
  4. Sebastian Weber & Joerg Doepke, 2006. "The Within-Distribution Business Cycle Dynamics of German Firms," Quantitative Macroeconomics Working Papers 20609, Hamburg University, Department of Economics. [Downloadable!]
    Other versions:
  5. Emiliano Santoro, 2006. "Macroeconomic fluctuations and the firms' rate of growth distribution: evidence from UK and US quoted companies," Department of Economics Working Papers 0606, Department of Economics, University of Trento, Italia. [Downloadable!]
  6. Döpke, Jörg & Funke, Michael & Holly, Sean & Weber, Sebastian, 2005. "The cross-sectional dynamics of German business cycles : a bird's eye view," Discussion Paper Series 1: Economic Studies 2005,23, Deutsche Bundesbank, Research Centre. [Downloadable!]
    Other versions:
  7. Strotmann, Harald & Döpke, Jörg & Buch, Claudia M., 2006. "Does trade openness increase firm-level volatility?," Discussion Paper Series 1: Economic Studies 2006,40, Deutsche Bundesbank, Research Centre. [Downloadable!]
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