Abstract

http://ssrn.com/abstract=1487989
 
 

References (26)



 
 

Citations (3)



 


 



The Cross-Section of Firms Over the Business Cycle: New Facts and a DSGE Exploration


Rudi Bachmann


University of Michigan at Ann Arbor - Department of Economics

Christian Bayer


Bocconi University

October 2009

CESifo Working Paper Series No. 2810

Abstract:     
Using a 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 heterogeneous-firm RBC model with quantitatively realistic countercyclically disperse 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 0.58, compared to 0.45 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 heterogeneous-firm models, and are therefore paramount in the calibration of these models.

Number of Pages in PDF File: 60

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

JEL Classification: E20, E22, E30, E32

working papers series


Download This Paper

Date posted: December 8, 2009  

Suggested Citation

Bachmann, Rudi and Bayer, Christian, The Cross-Section of Firms Over the Business Cycle: New Facts and a DSGE Exploration (October 2009). CESifo Working Paper Series No. 2810. Available at SSRN: http://ssrn.com/abstract=1487989

Contact Information

Rudi Bachmann (Contact Author)
University of Michigan at Ann Arbor - Department of Economics ( email )
611 Tappan Street
Ann Arbor, MI 48109-1220
United States
Christian Bayer
Bocconi University ( email )
Via Sarfatti, 25
Milan, MI 20136
Italy
Feedback to SSRN


Paper statistics
Abstract Views: 325
Downloads: 47
References:  26
Citations:  3

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.266 seconds