In:
American Economic Journal: Macroeconomics, American Economic Association, Vol. 8, No. 1 ( 2016-01-01), p. 148-198
Abstract:
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 counter-cyclicality of firm-level risk is driven by those firms that adjust their market exposure, which are larger than those that do not. (JEL D21, D22, E23, E32, L25)
Type of Medium:
Online Resource
ISSN:
1945-7707
,
1945-7715
DOI:
10.1257/mac.20130011
Language:
English
Publisher:
American Economic Association
Publication Date:
2016
detail.hit.zdb_id:
2452641-1
detail.hit.zdb_id:
2442376-2
Permalink
