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Correlated shocks within firms

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  • Tweedle, Jesse

Abstract

This paper investigates the correlations and covariances of the growth rates of establishments that have a common parent firm. Due to its association with cross-country business cycles and propagation of idiosyncratic shocks, firm comovement is an important facet of macroeconomic research. Using a long panel of Canadian manufacturing establishments, I find that within-firm establishment pairs have correlations 0.0477 higher than between-firm establishment pairs (which have an average correlation very close to zero) after controlling for industry and region effects.

Suggested Citation

  • Tweedle, Jesse, 2018. "Correlated shocks within firms," Economics Letters, Elsevier, vol. 163(C), pages 95-97.
    • Handle: RePEc:eee:ecolet:v:163:y:2018:i:c:p:95-97
    DOI: 10.1016/j.econlet.2017.12.018
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    References listed on IDEAS

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    9. Jörn Kleinert & Julien Martin & Farid Toubal, 2015. "The Few Leading the Many: Foreign Affiliates and Business Cycle Comovement," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(4), pages 134-159, October.
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    Cited by:

    1. Bena, Jan & Dinc, Serdar & Erel, Isil, 2022. "The international propagation of economic downturns through multinational companies: The real economy channel," Journal of Financial Economics, Elsevier, vol. 146(1), pages 277-304.

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    More about this item

    Keywords

    Economic fluctuations; Firm volatility; Firm ownership;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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