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Firm Dynamics in News Driven Business Cycle: The Role of Endogenous Survival Rate

Fan, Haichao and Xu, Zhiwei and Zou, Wei (2010): Firm Dynamics in News Driven Business Cycle: The Role of Endogenous Survival Rate.

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Abstract

Evidences from structural VAR show that new business formation positively co-moves with output under news shocks. The Jaimovich-Rebelo model augmented with firm dynamics can explain the empirical findings. The key assumption is endogenous survival rates for new entrants.

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