The Cross Sectional Dynamics of the Us Business Cycle: 1950-1999

London Business School Accounting Subject Area No. 02-026

39 Pages Posted: 23 May 2002

See all articles by Chris Higson

Chris Higson

London Business School

Sean Holly

University of Cambridge - Department of Applied Economics

Paul Kattuman

University of Cambridge - Judge Business School

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Abstract

Modern interest in business cycles has focused on the co-movements and correlations in the major macroeconomic aggregates. In this paper we offer another dimension to business cycle analysis which looks at the cross sectional distribution of the growth rate of gross sales by US quoted companies from 1950 to 1999.

We detect correlations between aggregate business cycle fluctuations and the higher moments of the cross sectional distribution. Using both weighted and unweighted rates of change in sales, we find a significant negative correlation between the aggregate rate of growth of GDP and the cross sectional variance and skewness of gross sales. On the other hand there is positive correlation, at business cycle frequencies with kurtosis. In order to explore this further we turn to the dynamic evolution of firms and analyse the sensitivity of growth rates to aggregate shocks conditioning on firm size.

The results suggest that despite considerable heterogeneity macroeconomic shocks have pervasive effects that are, however, more pronounced for firms in the middle range of growth. This has implications for both macro and industrial economics.

Keywords: cross sections, business cycles, size-growth relationship

Suggested Citation

Higson, Chris and Holly, Sean and Kattuman, Paul A., The Cross Sectional Dynamics of the Us Business Cycle: 1950-1999. London Business School Accounting Subject Area No. 02-026, Available at SSRN: https://ssrn.com/abstract=311239 or http://dx.doi.org/10.2139/ssrn.311239

Chris Higson

London Business School ( email )

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Sean Holly

University of Cambridge - Department of Applied Economics ( email )

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Paul A. Kattuman (Contact Author)

University of Cambridge - Judge Business School ( email )

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United Kingdom
+44 1223 764 136 (Phone)

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