Firm dynamics in news-driven business cycles: the role of endogenous survival rate |
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| Authors: | Haichao Fan Zhiwei Xu |
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| Affiliation: | 1. School of International Business Administration, Shanghai University of Finance and Economics, Shanghai, Chinafan.haichao@mail.shufe.edu.cn;3. Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China |
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| Abstract: | Evidences from the structural vector-error correction model shows that the new business formation and stock prices co-moves with output under news shocks. However, simply incorporating firm dynamics into Jaimovich and Rebelo’s (Jaimovich and Rebelo, 2009) model cannot explain these empirical findings. We show that this problem can be resolved by introducing endogenous survival rates for the new entrants. |
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| Keywords: | firm dynamics aggregate co-movement expectation-driven business cycle news shocks |
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