Advanced Search
MyIDEAS: Login to save this paper or follow this series

The cross-section of firms over the business cycle: new facts and a DSGE exploration

Contents:

Author Info

  • Bachmann, Ruediger
  • Bayer, Christian

Abstract

Using a unique German firm-level data set, this paper is the first to jointly study the cyclical properties of the cross-sections of firm-level real value added and Solow residual innovations, as well as capital and employment adjustment. We find two new business cycle facts: 1) The cross-sectional standard deviation of firm-level innovations in the Solow residual, value added and employment is robustly and significantly countercyclical. 2) The cross-sectional standard deviation of firm-level investment is procyclical. We show that a heterogeneousfirm RBC model with quantitatively realistic countercyclical innovations in the firm-level Solow residual and non-convex adjustment costs calibrated to the non-Gaussian features of the steady state investment rate distribution, produces investment dispersion that positively comoves with the cycle, with a correlation coefficient of 0.65, compared to 0.61 in the data. We argue more generally that the cross-sectional business cycle dynamics impose tight empirical restrictions on structural parameters and stochastic properties of driving forces in heterogeneousfirmmodels, and are therefore paramount in the calibration of these models. --

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://econstor.eu/bitstream/10419/27743/1/605021503.PDF
Download Restriction: no

Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2009,17.

as in new window
Length:
Date of creation: 2009
Date of revision:
Handle: RePEc:zbw:bubdp1:200917

Contact details of provider:
Postal: Postfach 10 06 02, 60006 Frankfurt
Phone: 0 69 / 95 66 - 34 55
Fax: 0 69 / 95 66 30 77
Email:
Web page: http://www.bundesbank.de/
More information through EDIRC

Related research

Keywords: Ss model; RBC model; cross-sectional firm dynamics; lumpy investment; countercyclical risk; aggregate shocks; idiosyncratic shocks; heterogeneous firms.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. 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.
  2. 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.
  3. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  4. Anonymous, 2006. "Front Materials," Choices, Agricultural and Applied Economics Association, vol. 21(3).
  5. Anonymous, 2006. "Editorial Information," Journal of Food Distribution Research, Food Distribution Research Society, vol. 37(01), March.
  6. Stephen Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2006. "Volatility and Dispersion in Business Growth Rates: Publicly Traded Versus Privately Held Firms," Working Papers 06-17, Center for Economic Studies, U.S. Census Bureau.
  7. Julia K. Thomas & Aubhik Khan, 2004. "Idiosyncratic shocks and the role of nonconvexities in plant and aggregate investment dynamics," 2004 Meeting Papers 455, Society for Economic Dynamics.
  8. Per Krusell & Anthony A. Smith, Jr., . "Income and Wealth Heterogeneity, Portfolio Choice, and Equilibrium Asset Returns," GSIA Working Papers 1997-45, Carnegie Mellon University, Tepper School of Business.
  9. Ruediger Bachmann & Ricardo J. Caballero & Eduardo M.R.A. Engel, 2006. "Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model," NBER Working Papers 12336, National Bureau of Economic Research, Inc.
  10. Bachmann, Ruediger & Bayer, Christian, 2009. "Firm-specific productivity risk over the business cycle: facts and aggregate implications," Discussion Paper Series 1: Economic Studies 2009,15, Deutsche Bundesbank, Research Centre.
  11. Zhu Wang, 2006. "Online banking comes of age," TEN, Federal Reserve Bank of Kansas City, issue Win, pages 22-25.
  12. Anonymous, 2006. "Inside Front Cover," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(2), October.
  13. Anonymous, 2006. "Contents Page," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(1), April.
  14. anonymous, 2006. "Georgia mirrors the nation," EconSouth, Federal Reserve Bank of Atlanta, issue Q 4.
  15. Anonymous, 2006. "Inside Front Cover," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(1), April.
  16. Russell W. Cooper & John C. Haltiwanger, 2000. "On the Nature of Capital Adjustment Costs," NBER Working Papers 7925, National Bureau of Economic Research, Inc.
  17. Anil Kashyap & Francois Gourio, 2007. "Investment Spikes: New Facts and a General Equilibrium Exploration," 2007 Meeting Papers 148, Society for Economic Dynamics.
  18. Nicholas Bloom & Max Floetotto & Nir Jaimovich & Itay Saporta-Eksten & Stephen J. Terry, 2014. "Really Uncertain Business Cycles," Working Papers 14-18, Center for Economic Studies, U.S. Census Bureau.
  19. Anonymous, 2006. "Contents and Cover Page," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 34(1).
  20. Anonymous, 2006. "Front Cover," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(1), April.
  21. Anonymous, 2006. "Cover and Table of Contents," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(01), April.
  22. Per Krusell & Anthony A. Smith & Jr., 1998. "Income and Wealth Heterogeneity in the Macroeconomy," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 867-896, October.
  23. Anonymous, 2006. "Front Materials," Choices, Agricultural and Applied Economics Association, vol. 21(4).
  24. C. Higson & S. Holly & P. Kattuman & S. Platis, 2004. "The Business Cycle, Macroeconomic Shocks and the Cross-Section: The Growth of UK Quoted Companies," Economica, London School of Economics and Political Science, vol. 71(281), pages 299-318, 05.
  25. Anonymous, 2006. "Contents Pages," Journal of Food Distribution Research, Food Distribution Research Society, vol. 37(02), July.
  26. Ricardo J. Caballero & Eduardo M. R. A. Engel & John C. Haltiwanger, 1995. "Plant-Level Adjustment and Aggregate Investment Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 1-54.
  27. Anonymous, 2006. "Washington Scene," Choices, Agricultural and Applied Economics Association, vol. 21(4).
  28. Higson, C. & Holly, S. & Kattuman, P., 2002. "The cross-sectional dynamics of the US business cycle: 1950-1999," Journal of Economic Dynamics and Control, Elsevier, vol. 26(9-10), pages 1539-1555, August.
  29. Hidvegi, Zoltan & Wang, Wenli & Whinston, Andrew B., 2006. "Buy-price English auction," Journal of Economic Theory, Elsevier, vol. 129(1), pages 31-56, July.
  30. Anonymous, 2006. "Cover and Contents Page," Journal of Food Distribution Research, Food Distribution Research Society, vol. 37(03), November.
  31. Anonymous, 2006. "Front Materials," Western Economics Forum, Western Agricultural Economics Association, vol. 5(02).
  32. Anonymous, 2006. "Front Cover," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(2), October.
  33. Ulf von Kalckreuth, 2003. "Exploring the role of uncertainty for corporate investment decisions in Germany," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 139(II), pages 173-206, June.
  34. Anonymous, 2006. "Contents Page," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 35(2), October.
  35. Anonymous, 2006. "Contents and Cover Page," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 34(2).
  36. Wang, Hung-Jen, 2006. "Stochastic frontier models," MPRA Paper 31079, University Library of Munich, Germany.
  37. Anonymous, 2006. "Front Materials," Choices, Agricultural and Applied Economics Association, vol. 21(2).
  38. Anonymous, 2006. "Washington Scene," Choices, Agricultural and Applied Economics Association, vol. 21(2).
  39. Anonymous, 2006. "Front Materials," Western Economics Forum, Western Agricultural Economics Association, vol. 5(01).
  40. anonymous, 2006. "Call for Nominations," Management Science, INFORMS, vol. 52(3), pages 472-472, March.
  41. Anonymous, 2006. "Cover Page and Contents," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(02), August.
  42. Eisfeldt, Andrea L. & Rampini, Adriano A., 2006. "Capital reallocation and liquidity," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 369-399, April.
  43. Anonymous, 2006. "Front Material," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(03), December.
  44. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, 05.
  45. Anonymous, 2006. "Cover and Contents Pages," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(01), April.
  46. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
  47. Caplin, Andrew S & Spulber, Daniel F, 1987. "Menu Costs and the Neutrality of Money," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 703-25, November.
  48. Holly, S. & Santoro, E., 2008. "Financial Fragility, Heterogeneous Firms and the Cross Section of the Business Cycle," Cambridge Working Papers in Economics 0846, Faculty of Economics, University of Cambridge.
  49. Anonymous, 2006. "Cover And Contents Pages," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(02), August.
  50. Anonymous, 2006. "Contents Pages," Journal of Food Distribution Research, Food Distribution Research Society, vol. 37(01), March.
  51. Anonymous, 2006. "Contents Pages," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(03), December.
  52. 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.
  53. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
  54. anonymous, 2006. "Community profile: Arizona," Community Investments, Federal Reserve Bank of San Francisco, issue Oct, pages 9.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. 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.
  2. Yongsung Chang & Sunoong Hwang, 2011. "Asymmetric Phase Shifts in the U.S. Industrial Production Cycles," RCER Working Papers 564, University of Rochester - Center for Economic Research (RCER).
  3. Tom Holden, 2012. "Medium-frequency cycles and the remarkable near trend-stationarity of output," School of Economics Discussion Papers 1412, School of Economics, University of Surrey.
  4. Briana Chang, 2012. "Adverse Selection and Liquidity Distortion in Decentralized Markets," 2012 Meeting Papers 403, Society for Economic Dynamics.
  5. Briana Chang, 2011. "Adverse Selection and Liquidity Distortion in Decentralized Markets," 2011 Meeting Papers 157, Society for Economic Dynamics.
  6. Matthias Kehrig, 2011. "The Cyclicality of Productivity Dispersion," 2011 Meeting Papers 484, Society for Economic Dynamics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:zbw:bubdp1:200917. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.