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The Business Cycle, Macroeconomic Shocks and the Cross Section: Evidence from UK Quoted Companies

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  • Higson, C.

    (London Business School)

  • S. Holly

    (Cambridge University)

  • P. Kattuman

    (KPMG)

  • S. Platis

Abstract

Co-movements and correlations in the major macroeconomic aggregates has been the focus of much of the 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 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. 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 middle range of growth. This explains the cycle-related patterns in the moments of the growth rate cross section. These findings are of importance in understanding firm level as well as business cycle dynamics.

Suggested Citation

  • Higson, C. & S. Holly & P. Kattuman & S. Platis, 2002. "The Business Cycle, Macroeconomic Shocks and the Cross Section: Evidence from UK Quoted Companies," Royal Economic Society Annual Conference 2002 102, Royal Economic Society.
    • Handle: RePEc:ecj:ac2002:102
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    1. Cable on competition
      by chris dillow in Stumbling and Mumbling on 2010-09-22 20:06:31

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    1. 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.

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