The overshooting of firms’ destruction, banks and productivity shocks

Economics

Research output: Contribution to Journal/Magazine › Journal article › peer-review

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The overshooting of firms’ destruction, banks and productivity shocks. / Rossi, L.
In: European Economic Review, Vol. 113, 30.04.2019, p. 136-155.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Rossi, L 2019, 'The overshooting of firms’ destruction, banks and productivity shocks', European Economic Review, vol. 113, pp. 136-155. https://doi.org/10.1016/j.euroecorev.2019.01.001

APA

Rossi, L. (2019). The overshooting of firms’ destruction, banks and productivity shocks. European Economic Review, 113, 136-155. https://doi.org/10.1016/j.euroecorev.2019.01.001

Vancouver

Rossi L. The overshooting of firms’ destruction, banks and productivity shocks. European Economic Review. 2019 Apr 30;113:136-155. Epub 2019 Jan 23. doi: 10.1016/j.euroecorev.2019.01.001

Author

Rossi, L. / The overshooting of firms’ destruction, banks and productivity shocks. In: European Economic Review. 2019 ; Vol. 113. pp. 136-155.

Bibtex

@article{0df2d92fada24172a2386b405a9c965b,

title = "The overshooting of firms{\textquoteright} destruction, banks and productivity shocks",

abstract = "Using U.S. quarterly data, we show that in response to a positive productivity shock: (i) firms{\textquoteright} creation increases (ii) firms{\textquoteright} destruction reduces at impact, then overshoots its long-run level, peaking almost four years later above its steady-state (iii) banks{\textquoteright} markup reduces. To address these three facts, we provide an NK-DSGE model where firm dynamics are endogenous, the banking sector is monopolistic competitive, and defaulting firms do not repay loans to banks. We show that the interaction between firms and banks is key to replicate the empirical evidence. Contrary to conventional wisdom, in the baseline model, the effects of the shock are dampened with respect to a model without banks. ",

keywords = "BVAR, Countercyclical banks{\textquoteright} markup, Firms{\textquoteright} creation, Firms{\textquoteright} destruction, Monopolistic banks, Overshooting of firms{\textquoteright} destruction, Productivity shocks, banking, competitiveness, industry, monopoly, productivity, vector autoregression, United States",

author = "L. Rossi",

year = "2019",

month = apr,

day = "30",

doi = "10.1016/j.euroecorev.2019.01.001",

language = "English",

volume = "113",

pages = "136--155",

journal = "European Economic Review",

issn = "0014-2921",

publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - The overshooting of firms’ destruction, banks and productivity shocks

AU - Rossi, L.

PY - 2019/4/30

Y1 - 2019/4/30

N2 - Using U.S. quarterly data, we show that in response to a positive productivity shock: (i) firms’ creation increases (ii) firms’ destruction reduces at impact, then overshoots its long-run level, peaking almost four years later above its steady-state (iii) banks’ markup reduces. To address these three facts, we provide an NK-DSGE model where firm dynamics are endogenous, the banking sector is monopolistic competitive, and defaulting firms do not repay loans to banks. We show that the interaction between firms and banks is key to replicate the empirical evidence. Contrary to conventional wisdom, in the baseline model, the effects of the shock are dampened with respect to a model without banks.

AB - Using U.S. quarterly data, we show that in response to a positive productivity shock: (i) firms’ creation increases (ii) firms’ destruction reduces at impact, then overshoots its long-run level, peaking almost four years later above its steady-state (iii) banks’ markup reduces. To address these three facts, we provide an NK-DSGE model where firm dynamics are endogenous, the banking sector is monopolistic competitive, and defaulting firms do not repay loans to banks. We show that the interaction between firms and banks is key to replicate the empirical evidence. Contrary to conventional wisdom, in the baseline model, the effects of the shock are dampened with respect to a model without banks.

KW - BVAR

KW - Countercyclical banks’ markup

KW - Firms’ creation

KW - Firms’ destruction

KW - Monopolistic banks

KW - Overshooting of firms’ destruction

KW - Productivity shocks

KW - banking

KW - competitiveness

KW - industry

KW - monopoly

KW - productivity

KW - vector autoregression

KW - United States

U2 - 10.1016/j.euroecorev.2019.01.001

DO - 10.1016/j.euroecorev.2019.01.001

M3 - Journal article

VL - 113

SP - 136

EP - 155

JO - European Economic Review

JF - European Economic Review

SN - 0014-2921

ER -

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