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Firms and Aggregate Dynamics

Author

Listed:
  • Thomas Philippon
  • Francesco Franco

    (Economics Universidade Nova de Lisboa)

Abstract

We investigate the role of permanent and transitory shocks for firms and aggregate dynamics. We find that permanent shocks to productivity and permanent shifts in the composition of output explain at least four-fifths of firms' dynamics. However, these permanent shocks are almost uncorrelated across firms and are therefore less relevant for aggregate dynamics. Transitory shocks, on the other hand, are not very important at the firm level, but they account for most of the volatility of aggregate hours and output, because they are significantly correlated across firms. Finally, we try to make some progress on the interpretation of the shocks. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Thomas Philippon & Francesco Franco, 2005. "Firms and Aggregate Dynamics," 2005 Meeting Papers 246, Society for Economic Dynamics.
    • Handle: RePEc:red:sed005:246
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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