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Macroeconomic Factors and Swedish Small and Medium-Sized Manufacturing Firm Failure

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Author Info

  • Salman, A. Khalik

    (CAFO, Växjö University)

  • von Friedrichs, Yvonne

    (CAFO, Växjö University)

  • Shukur, Ghazi

    ()
    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

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    Abstract

    This paper employs a time series cointegration approach to evaluate the relationship between manufacturing firm failure and macroeconomic factors for the Swedish manufacturing sector in the period 1986 – 2006. It uses quarterly data for this period. We found that in long run a firms’ failure is negatively related to the level of industrial activity, money supply, GNP and economic openness rate, and positively related to the real wage. Time series Error Correction Model (ECM) estimates suggest that macroeconomic risk factors impinge on firm failures on the same direction in both the short run and the long run and that adjustment to stabilise the relationship is quite slow.

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    Bibliographic Info

    Paper provided by Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies in its series Working Paper Series in Economics and Institutions of Innovation with number 185.

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    Length: 25 pages
    Date of creation: 26 Aug 2009
    Date of revision:
    Handle: RePEc:hhs:cesisp:0185

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    Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
    Phone: +46 8 790 95 63
    Web page: http://www.infra.kth.se/cesis/
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    Related research

    Keywords: firm failure; macroeconomic factors; cointegration analysis; diagnostic tests;

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    8. Platt, Harlan D. & Platt, Marjorie B., 1994. "Business cycle effects on state corporate failure rates," Journal of Economics and Business, Elsevier, vol. 46(2), pages 113-127, May.
    9. Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May.
    10. William J. Martin & Darrell Porter, 1985. "Testing For Changes In The Structure Of The Demand For Meat In Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 29(1), pages 16-31, 04.
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