Business-Cycle Insurance via Firm-Level Strategic Capital Replacement Summer 2006 Paper Proposal

2006 ◽  
Author(s):  
Doriana Ruffino ◽  
Jonathan Treussard
Keyword(s):  
Business Cycle ◽  
Firm Level ◽  
Capital Replacement

Markups, Aggregation, and Inventory Adjustment

2004 ◽  
Vol 94 (5) ◽  
pp. 1328-1353 ◽  
Author(s):  
Daniele Coen-Pirani
Keyword(s):  
Business Cycle ◽  
Aggregate Data ◽  
Firm Level ◽  
Partial Adjustment ◽  
Sector Model ◽  
Level Data ◽  
Firm Level Data ◽  
Downward Bias ◽  
Rapid Reaction ◽  
The Business Cycle

In this paper I suggest a unified explanation for two puzzles in the inventory literature: first, estimates of inventory speeds of adjustment in aggregate data are very small relative to the apparent rapid reaction of stocks to unanticipated variations in sales. Second, estimates of inventory speeds of adjustment in firm-level data are significantly higher than in aggregate data. The paper develops a multi-sector model where inventories are held to avoid stockouts, and price markups vary along the business cycle. The omission of countercyclical markup variations from inventory targets introduces a downward bias in estimates of adjustment speeds obtained from partial adjustment models. When the cyclicality of markups differs across sectors, this downward bias is shown to be more severe with aggregate rather than firm-level data. Similar results apply not only to inventories, but also to labor and prices. Montercarlo simulations of a calibrated version of the model suggest that these biases are quantitatively significant.

scholarly journals Investment Dispersion and the Business Cycle

2014 ◽  
Vol 104 (4) ◽  
pp. 1392-1416 ◽  
Author(s):  
Rüdiger Bachmann ◽  
Christian Bayer
Keyword(s):  
Business Cycle ◽  
Adjustment Costs ◽  
Firm Risk ◽  
Firm Level ◽  
Cross Sectional ◽  
Capital Adjustment ◽  
Investment Rates ◽  
Business Cycle Model ◽  
The Business Cycle ◽  
Heterogeneous Firm

The cross-sectional dispersion of firm-level investment rates is procyclical. This makes investment rates different from productivity, output, and employment growth, which have countercyclical dispersions. A calibrated heterogeneous-firm business cycle model with nonconvex capital adjustment costs and countercyclical dispersion of firm-level productivity shocks replicates these facts and produces a correlation between investment dispersion and aggregate output of 0.53, close to 0.45 in the data. We find that small shocks to the dispersion of productivity, which in the model constitutes firm risk, suffice to generate the mildly procyclical investment dispersion in the data but do not produce serious business cycles. (JEL D42, D92, E32, G31, G32)

scholarly journals Multinational Firms and International Business Cycle Transmission*

2016 ◽  
Vol 132 (2) ◽  
pp. 921-962 ◽  
Author(s):  
Javier Cravino ◽  
Andrei A. Levchenko
Keyword(s):  
Business Cycle ◽  
International Business ◽  
Multinational Firms ◽  
Quantitative Model ◽  
Individual Country ◽  
Firm Level ◽  
Data Set ◽  
International Business Cycle ◽  
The Impact ◽  
Foreign Shocks

Abstract We investigate how multinational firms contribute to the transmission of shocks across countries using a large multicountry firm-level data set that contains cross-border ownership information. We use these data to document two novel empirical patterns. First, foreign affiliate and headquarter sales exhibit strong positive comovement: a 10% growth in the sales of the headquarter is associated with a 2% growth in the sales of the affiliate. Second, shocks to the source country account for a significant fraction of the variation in sales growth at the source-destination level. We propose a parsimonious quantitative model to interpret these findings and to evaluate the role of multinational firms for international business cycle transmission. For the typical country, the impact of foreign shocks transmitted by all foreign multinationals combined is non-negligible, accounting for about 10% of aggregate productivity shocks. On the other hand, since bilateral multinational production shares are small, interdependence between most individual country pairs is minimal. Our results do reveal substantial heterogeneity in the strength of this mechanism, with the most integrated countries significantly more affected by foreign shocks.

scholarly journals Large Firm Dynamics and the Business Cycle

2019 ◽  
Vol 109 (4) ◽  
pp. 1375-1425 ◽  
Author(s):  
Vasco M. Carvalho ◽  
Basile Grassi
Keyword(s):  
Business Cycle ◽  
Size Distribution ◽  
Firm Size ◽  
Large Firm ◽  
Firm Dynamics ◽  
Aggregate Fluctuations ◽  
Firm Level ◽  
Firm Size Distribution ◽  
The Business Cycle

Do large firm dynamics drive the business cycle? We answer this question by developing a quantitative theory of aggregate fluctuations caused by firm-level disturbances alone. We show that a standard heterogeneous firm dynamics setup already contains in it a theory of the business cycle, without appealing to aggregate shocks. We offer an analytical characterization of the law of motion of the aggregate state in this class of models, the firm size distribution, and show that aggregate output and productivity dynamics display: (i ) persistence, (ii ) volatility, and (iii ) time-varying second moments. We explore the key role of moments of the firm size distribution, and, in particular, the role of large firm dynamics, in shaping aggregate fluctuations, theoretically, quantitatively, and in the data. (JEL D21, D22, D24, E32, L11)

scholarly journals The Market for Used Capital: Endogenous Irreversibility and Reallocation over the Business Cycle

2018 ◽  
Vol 108 (9) ◽  
pp. 2383-2419 ◽  
Author(s):  
Andrea Lanteri
Keyword(s):  
Business Cycle ◽  
Adjustment Costs ◽  
Physical Capital ◽  
Firm Level ◽  
Secondary Markets ◽  
Equilibrium Dynamics ◽  
Capital Adjustment ◽  
State Dependent ◽  
The Business Cycle ◽  
Investment Goods

This paper studies the business-cycle dynamics of secondary markets for physical capital and their effects on the macroeconomy. In the data, both capital reallocation and the price of used capital are procyclical. To rationalize these facts, I propose a model with endogenous partial irreversibility, where used investment goods are imperfect substitutes for new ones because of firm-level capital specificity. Equilibrium dynamics in the market for used capital induce countercyclical dispersion of marginal products of capital, propagate movements in aggregate TFP, and provide a microfoundation for state-dependent nonconvex capital adjustment costs. (JEL E22, E23, E32, G31)

scholarly journals The Micro Origins of International Business-Cycle Comovement

2018 ◽  
Vol 108 (1) ◽  
pp. 82-108 ◽  
Author(s):  
Julian di Giovanni ◽  
Andrei A. Levchenko ◽  
Isabelle Mejean
Keyword(s):  
Business Cycle ◽  
International Business ◽  
Value Added ◽  
Foreign Country ◽  
Firm Level ◽  
International Business Cycle ◽  
French Firm ◽  
Micro Level ◽  
Using Data ◽  
The Impact

This paper investigates the role of individual firms in international business-cycle comovement using data covering the universe of French firm-level value added and international linkages over the period 1993–2007. At the micro level, trade and multinational linkages with a particular foreign country are associated with a significantly higher correlation between a firm and that foreign country. The impact of direct linkages on comovement at the micro level has significant macro implications. Without those linkages the correlation between France and foreign countries would fall by about 0.098, or one-third of the observed average correlation of 0.291 in our sample of partner countries. (JEL F14, F23, F44, F62, L14)

scholarly journals THE DYNAMICS OF MANUFACTURING INDUSTRY AND THE RESPONSE TOWARD BUSINESS CYCLE

2010 ◽  
Vol 13 (2) ◽  
pp. 131-164
Author(s):  
Yati Kurniati ◽  
Yanfitri Yanfitri
Keyword(s):  
Business Cycle ◽  
Production Cost ◽  
Manufacturing Industry ◽  
Firm Level ◽  
Industry Studies ◽  
Business Fluctuations ◽  
Productivity Rate ◽  
The Business Cycle ◽  
Boom Period

The role of the manufacturing industry in the economy has expanded significantly from 19 percent in 1990 to 26 percent in 2009, while its labor absorption only increased from 10 percent to 12.2 percent. The cycle of the manufacturing industry has been in line with the economic growth. This study explores the implications of the firm-level heterogeneity over the business cycle. By using the panel multinomial logit, it shows that firms with less capital and small size have greater probability to exit the industry during the boom/ bust period. Sensitivity of the company to changes in capital is greater during the boom period. Only highly productive firms enter and begin production during recessions. Companies with higher productivity rate also have greater probability to enter the market. In contrast, higher production cost and higher market concentration increase the probability for smaller companies to exit from the industry.JEL Classification:  : D24, L6, E32Keywords: Production, Cost, Capital and Total Factor Productivity, Industry Studies Manufacturing, Business Fluctuations/cycles

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