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

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  • Higson, C.
  • Holly, S.
  • Kattuman, P.
  • S. Platis

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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Bibliographic 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
Date of revision:
Handle: RePEc:cam:camdae:0114

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

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Citations

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Cited by:
  1. 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.
  2. Ruediger Bachmann & Christian Bayer, 2009. "Firm-Specific Productivity Risk over the Business Cycle: Facts and Aggregate Implications," 2009 Meeting Papers 869, Society for Economic Dynamics.
  3. Harald Oberhofer, 2012. "Firm Growth, European Industry Dynamics and Domestic Business Cycles," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(3), pages 316-337, 07.
  4. Michael Funke & Sebastian Weber & Jörg Döpke & Sean Holly, 2008. "The Cross-Section of Output and Inflation in a Dynamic Stochastic General Equilibrium Model with Sticky Prices," Quantitative Macroeconomics Working Papers 20809, Hamburg University, Department of Economics.
  5. Weber, Sebastian & Döpke, Jörg, 2006. "The within-distribution business cycle dynamics of German firms," Discussion Paper Series 1: Economic Studies 2006,29, Deutsche Bundesbank, Research Centre.
  6. 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.
  7. Ghosh, Saibal, 2009. "Do productivity and ownership really matter for growth? Firm-level evidence," Economic Modelling, Elsevier, vol. 26(6), pages 1403-1413, November.
  8. Sebastian Weber & Joerg Doepke, 2006. "The Within-Distribution Business Cycle Dynamics of German Firms," Quantitative Macroeconomics Working Papers 20609, Hamburg University, Department of Economics.
  9. Alex Coad & Werner Hölzl, 2010. "Firm Growth: Empirical Analysis," WIFO Working Papers 361, WIFO.
  10. Domenico Delli Gatti & Edoardo Gaffeo & Mauro Gallegati, 2008. "A look at the relationship between industrial dynamics and aggregate fluctuations," Department of Economics Working Papers 0803, Department of Economics, University of Trento, Italia.
  11. 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.
  12. Christian Bayer & Ruediger Bachmann, 2009. "The Cross-section of Firms over the Business Cycle: New Facts and a DSGE Exploration," 2009 Meeting Papers 866, Society for Economic Dynamics.
  13. 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.

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