Employment Effects of Innovations over the Business Cycle: Firm-Level Evidence from European Countries

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.

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Investment Dispersion and the Business Cycle

The American Economic Review ◽

10.1257/aer.104.4.1392 ◽

2014 ◽

Vol 104 (4) ◽

pp. 1392-1416 ◽

Cited By ~ 54

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)

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The Prediction of Business Cycle Phases: Financial Variables and International Linkages

National Institute Economic Review ◽

10.1177/002795010218200110 ◽

2002 ◽

Vol 182 ◽

pp. 96-105 ◽

Cited By ~ 8

Author(s):

Denise R. Osborn ◽

Marianne Sensier

Keyword(s):

Stock Market ◽

Business Cycle ◽

European Countries ◽

Financial Variables ◽

The Third ◽

The Us ◽

International Linkages ◽

The Business Cycle ◽

The Uk

This paper discusses recent research at the Centre for Growth and Business Cycle Research on the prediction of the expansion and recession phases of the business cycle for the UK, US, Germany, France and Italy. Financial variables are important predictors in these models, with the stock market playing a key role in the US but not the European countries, including the UK. In contrast, international linkages are important for the European countries. Our models suggest that the US and German economies have now emerged from the recession of 2001, and that all five countries will be in expansion during the third quarter of this year.

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Large Firm Dynamics and the Business Cycle

The American Economic Review ◽

10.1257/aer.20151317 ◽

2019 ◽

Vol 109 (4) ◽

pp. 1375-1425 ◽

Cited By ~ 13

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)

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Do COVID-19 Lock-Downs Affect Business Cycle? Analysis Using Energy Consumption Cycle Clock for Selected European Countries

Energies ◽

10.3390/en15010340 ◽

2022 ◽

Vol 15 (1) ◽

pp. 340

Author(s):

Tadeusz Kufel ◽

Paweł Kufel ◽

Marcin Błażejowski

Keyword(s):

Energy Consumption ◽

Business Cycle ◽

Electricity Consumption ◽

Economic Recession ◽

European Countries ◽

Pharmaceutical Drugs ◽

Test Results ◽

Global Pandemic ◽

The Business Cycle ◽

Pharmaceutical Interventions

On 11 March 2020, the WHO declared the COVID-19 epidemic to be a global pandemic. This was a consequence of the rapid increase in the number of people with positive test results, the increase in deaths due to COVID-19, and the lack of pharmaceutical drugs. Governments introduced national lockdowns, which have impacted both energy consumption and economies. The purpose of this paper is to answer the following question: do COVID-19 lockdowns affect the business cycle? We used the cycle clock approach to assess the magnitude of decrease in electricity consumption in the three waves of the epidemic, namely, April 2020, November 2021, and April 2021. Additionally, we checked the relation between energy consumption and GDP by means of spectral analysis. Results for selected 28 European countries confirm an impact of the introduced non-pharmaceutical interventions on both energy consumption and business cycle. The reduction of restrictions in subsequent pandemic waves increased electricity consumption, which suggests movement out of the economic recession.

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

The American Economic Review ◽

10.1257/aer.20160131 ◽

2018 ◽

Vol 108 (9) ◽

pp. 2383-2419 ◽

Cited By ~ 11

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)

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