AGGREGATE BUSINESS FAILURES AND MACROECONOMIC CONDITIONS: A VAR LOOK AT THE US BETWEEN 1980 AND 2004

abstract

• In this paper, we study the U.S. aggregate business failures during 1980- 2004 in relation to four macroeconomic variables: aggregate corporate profits, the producer price index, the interest rate, and stock market performance. We argue that aggregate business failures should not be treated as a passive variable, as usually done in previous studies, and we allow its possible causal effect on other macroeconomic variables through a Structural Vector Autoregression model that builds on Directed Acyclic Graphs. Granger type causality and innovation accounting results both show that while subject to the influence of interest rates, aggregate business failures are quite exogenous in comparison to the other three variables. The implications of these findings are discussed as well. 2013 Universidad del CEMA.

authors

• Bessler, David
• Leatham, David

published proceedings

• JOURNAL OF APPLIED ECONOMICS

author list (cited authors)

• Zhang, J., Bessler, D. A., & Leatham, D. J.

citation count

• 12

complete list of authors

• Zhang, Jin||Bessler, David A||Leatham, David J

publication date

• May 2013

publisher

• Taylor & Francis  Publisher

published in

• Journal of Applied Economics  Journal

keywords

• Business Failures
• Directed Acyclic Graphs
• Macroeconomic Conditions
• Vector Autoregression

Digital Object Identifier (DOI)

• 10.1016/S1514-0326(13)60008-2

start page

• 179

end page

• 202

volume

• 16

issue

• 1

URL

• http://dx.doi.org/10.1016/s1514-0326(13)60008-2