Market Exposure and Endogenous Firm Volatility over the Business Cycle
We propose a theory of endogenous firm-level risk over the business cycle based on endogenous market exposure. Firms that reach a larger number of markets diversify market-specific demand shocks at a cost. The model is driven only by total factor productivity shocks and captures the observed counter...
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| Veröffentlicht in: | American economic journal. Macroeconomics 2016-01, Vol.8 (1), p.148-198 |
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| container_title | American economic journal. Macroeconomics |
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| creator | Decker, Ryan A. D'Erasmo, Pablo N. Boedo, Hernan Moscoso |
| description | We propose a theory of endogenous firm-level risk over the business cycle based on endogenous market exposure. Firms that reach a larger number of markets diversify market-specific demand shocks at a cost. The model is driven only by total factor productivity shocks and captures the observed countercyclity of firm-level risk. Using a panel of US firms we show that, consistent with our theoretical model, measures of market reach are procyclical, and the countercyclicality of firm-level risk is driven by those firms that adjust their market exposure, which are larger than those that do not. |
| doi_str_mv | 10.1257/mac.20130011 |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 1945-7707 |
| ispartof | American economic journal. Macroeconomics, 2016-01, Vol.8 (1), p.148-198 |
| issn | 1945-7707 1945-7715 |
| language | eng |
| recordid | cdi_proquest_journals_1753560995 |
| source | American Economic Association; JSTOR |
| subjects | Business cycles Censuses Central banks Economic development Economic theory GDP Gross Domestic Product Macroeconomics Productivity Risk exposure Studies Volatility |
| title | Market Exposure and Endogenous Firm Volatility over the Business Cycle |
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