Firms and aggregate dynamics

Francesco Franco, Thomas Philippon

Research output: Contribution to journalArticlepeer-review

14 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)587-600
JournalReview of Economics and Statistics
Volume89
Issue number4
DOIs
Publication statusPublished - 1 Jan 2007

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