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Great Moderation at the Firm Level? Unconditional vs. Conditional Output Volatility

Author

Listed:
  • Buch Claudia M

    () (University of Tuebingen)

  • Doepke Joerg

    () (University of Applied Sciences Merseburg)

  • Stahn Kerstin

    () (Deutsche Bundesbank)

Abstract

We test whether there has been a "Great Moderation" of output volatility at the firm level. The multifactor residual model proposed by Pesaran (2006) is used to isolate the idiosyncratic component of firms' sales growth from macroeconomic developments. This methodology is applied to a balanced panel of about 1,200 German firms covering a 35-year period (1971-2005). Our research has three main findings. First, unconditional firm-level volatility and aggregate output volatility have seen similar downward trends. Second, conditional, idiosyncratic firm-level volatility does not exhibit a downward trend. Third, there is a positive link between growth and volatility at the firm level.

Suggested Citation

  • Buch Claudia M & Doepke Joerg & Stahn Kerstin, 2009. "Great Moderation at the Firm Level? Unconditional vs. Conditional Output Volatility," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-27, May.
  • Handle: RePEc:bpj:bejeap:v:9:y:2009:i:1:n:20
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Douglas Sutherland & Peter Hoeller & Balázs Égert & Oliver Röhn, 2010. "Counter-cyclical Economic Policy," OECD Economics Department Working Papers 760, OECD Publishing.
    2. Buch Claudia M & Doepke Joerg & Stahn Kerstin, 2009. "Great Moderation at the Firm Level? Unconditional vs. Conditional Output Volatility," The B.E. Journal of Economic Analysis & Policy, De Gruyter, pages 1-27.
    3. Buch Claudia M & Doepke Joerg & Stahn Kerstin, 2009. "Great Moderation at the Firm Level? Unconditional vs. Conditional Output Volatility," The B.E. Journal of Economic Analysis & Policy, De Gruyter, pages 1-27.
    4. Vannoorenberghe, G., 2012. "Firm-level volatility and exports," Journal of International Economics, Elsevier, pages 57-67.
    5. Andre Neveu, 2015. "Earnings Volatility Trends and the Great Moderation: A Multifactor Residual Approach," Atlantic Economic Journal, Springer;International Atlantic Economic Society, pages 229-245.
    6. Francesco Bogliacino & Dario Guarascio & Mario Pianta & Matteo Lucchese, 2015. "Business Cycles, Technology and Exports," DOCUMENTOS DE TRABAJO - ESCUELA DE ECONOMÍA 012974, UN - RCE - CID.
    7. Vannoorenberghe, Gonzague & Wang, Zheng & Yu, Zhihong, 2016. "Volatility and diversification of exports: Firm-level theory and evidence," European Economic Review, Elsevier, pages 216-247.
    8. Evan Totty, 2014. "The Effect of Minimum Wages on Employment: A Factor Model Approach," Purdue University Economics Working Papers 1278, Purdue University, Department of Economics.
    9. Paula Garda & Volker Ziemann, 2014. "Economic Policies and Microeconomic Stability: A Literature Review and Some Empirics," OECD Economics Department Working Papers 1115, OECD Publishing.
    10. Dario Guarascio & Mario Pianta & Matteo Lucchese & Francesco Bogliacino, 2015. "Business cycles, technology and exports," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 32(2), pages 167-200, August.

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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