This paper considers a model of firm dynamics to study how well aggregate shocks account for fluctuations in the entry and exit of establishments. To do this, I construct measures of aggregate technology, labor and investment shocks. Under reasonable parameters, the model indicates that labor shocks (and not technology or investment shocks) best account for cyclical fluctuations in entry and exit rates. Moreover, this has had significant implications for the aggregate economy, as entry and exit have made output and hours more volatile and persistent.
|Number of pages||91|
|Journal||The B.E. Journal of Macroeconomics|
|Publication status||Published - Jan 2016|
- business cycle accounting
- business cycles
- firm dynamics