Dispersion over the business cycle : passthrough, productivity, and demand

Mikael Carlsson, Alex Clymo and Knut-Eric Joslin

We characterize the dispersion of firm-level productivity and demand shocks using Swedish microdata including prices and utilization and analyse the consequences for firms and the aggregate economy. Demand dispersion increases by more than TFPQ dispersion in recessions. Productivity shocks pass through incompletely to prices and have limited effect on sales dispersion. Demand shocks explain most of the variation in sales dispersion. In a heterogeneousfirm model matching the micro facts, demand dispersion has unambiguously negative effects on output via a "wait and see" channel. Productivity dispersion does not generate "wait and see" effects, but affects output negatively by inducing markup dispersion.

MoreLess

Year of publication:	May 2022
Authors:	Carlsson, Mikael ; Clymo, Alex ; Joslin, Knut-Eric
Publisher:	Stockholm : Sveriges Riksbank
Subject:	demand estimation \| productivity \| variable markups \| business cycles \| dispersion \| uncertainty \| passthrough \| adjustment costs \| Konjunktur \| Business cycle \| Produktivität \| Productivity \| Mark-up Pricing \| Mark-up pricing \| Anpassungskosten \| Adjustment costs \| Schätzung \| Estimation \| Nachfrage \| Demand \| Theorie \| Theory \| Preismanagement \| Pricing strategy \| Industrie \| Manufacturing industries