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Understanding entry and exit: a business cycle accounting approach

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  • Macnamara Patrick

    (Economics, School of Social Sciences, Arthur Lewis Building, Oxford Road, University of Manchester, Manchester, M13 9PL, UK)

Abstract

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.

Suggested Citation

  • Macnamara Patrick, 2016. "Understanding entry and exit: a business cycle accounting approach," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(1), pages 47-91, January.
    • Handle: RePEc:bpj:bejmac:v:16:y:2016:i:1:p:47-91:n:6
    DOI: 10.1515/bejm-2015-0006
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    References listed on IDEAS

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    Cited by:

    1. Patrick Macnamara, 2015. "Limited Re-Entry And Business Cycles," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 40(4), pages 1-40, December.
    2. Pedro Brinca & João Ricardo Costa Filho & Francesca Loria, 2024. "Business cycle accounting: What have we learned so far?," Journal of Economic Surveys, Wiley Blackwell, vol. 38(4), pages 1276-1316, September.

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    More about this item

    Keywords

    business cycle accounting; business cycles; entry; exit; firm dynamics;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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