SBE-UKRI: Business Cycles, Uncertain Growth and the Distribution of Production
Lead Research Organisation:
Queen Mary University of London
Department Name: Economics
Abstract
Young firms historically have had a large share in job creation, and the most successful among them have the highest growth rates of all firms and are a major source of productivity-enhancing innovation. Distributional shifts since 2007 featuring substantially fewer, smaller and slower-growing young firms thus may threaten lasting economic damage. Our proposed environment has the necessary heterogeneity to study the interplay between these changes, anemic investment and the aggregate productivity slowdown. We will ensure that our model reproduces post-war aggregate regularities while predicting a distribution of firms that meaningfully resembles the U.S. firm distribution and allowing a possibility of distributional changes like those among U.S. businesses since the last recession. Solving for stochastic dynamic general equilibrium in the presence of shocks to TFP growth and growth uncertainty in our setting with non-separable utility requires a generalization of numerical methods beyond existing heterogeneous firm studies. Our new method will be of general interest to researchers working in the area, expanding the realm of micro-to-macro research.
Publications
Chen C
(2023)
Uncertainty, imperfect information, and expectation formation over the firm's life cycle
in Journal of Monetary Economics
Chen C
(2020)
Uncertainty, Imperfect Information, and Expectation Formation Over the Firms's Life Cycle
in SSRN Electronic Journal
Chen C
(2021)
Measuring business-level expectations and uncertainty: survey evidence and the COVID-19 pandemic.
in Japanese economic review (Oxford, England)
Description | The works explore both empirically and theoretically how companies make decisions when they are uncertain about the future. We found that companies tend to be more cautious when they are uncertain, which can lead to reduced investment and hiring. However, firms with more experience tend to be better at dealing with uncertainty and making decisions even when information is imperfect. The original survey that was conducted during the COVID-19 pandemic revealed that firms with more resources were better able to adapt to the pandemic and that companies in certain industries were more optimistic about the future than others. |
Exploitation Route | Research findings suggest that understanding how firms deal with uncertainty can provide insights into how businesses can better prepare for and respond to unexpected events like the pandemic, informing and enabling policy-makers to manage economic crises. |
Sectors | Financial Services, and Management Consultancy,Government, Democracy and Justice |
Description | A talk at the Keio Economic Society symposium. |
Form Of Engagement Activity | A talk or presentation |
Part Of Official Scheme? | No |
Geographic Reach | Local |
Primary Audience | Other audiences |
Results and Impact | Presented research on firms' expectations and performance in a symposium where about 50 academics gattered, leading to a wide range of discussions about data, policy implications, and research directions going forward. |
Year(s) Of Engagement Activity | 2021 |
Description | Canon Institute for Global Studies |
Form Of Engagement Activity | A talk or presentation |
Part Of Official Scheme? | No |
Geographic Reach | Local |
Primary Audience | Professional Practitioners |
Results and Impact | 10+ academics attended a talk and dialog on firm debt and aggregate fluctuations, which led to questions and discussion on the current situation of excessive borrowing in the business sector in Japan, and the proposal for a second round of discussion was put on the table. |
Year(s) Of Engagement Activity | 2022 |
Description | National Graduate Institute for Policy Studies |
Form Of Engagement Activity | A talk or presentation |
Part Of Official Scheme? | No |
Geographic Reach | International |
Primary Audience | Professional Practitioners |
Results and Impact | About 20 academics and postgraduate students attended a seminar/talk, with questions and discussion on uncertainty and business dynamics and a more detailed discussion with academics subsequently. |
Year(s) Of Engagement Activity | 2022 |
Description | Presented at the Virtual East Asia Macroeconomics Seminar (VEAMS) |
Form Of Engagement Activity | A talk or presentation |
Part Of Official Scheme? | No |
Geographic Reach | International |
Primary Audience | Other audiences |
Results and Impact | About 50 academics and postgraduate students attended a seminar, which involved questions and discussion on various issues regarding firm learning, which resulted in more one-to-one meetings with academics. |
Year(s) Of Engagement Activity | 2021 |
URL | https://www.veamsmacro.org/past-seminars.html |
Description | Temple University Economics Department Seminar |
Form Of Engagement Activity | A talk or presentation |
Part Of Official Scheme? | No |
Geographic Reach | International |
Primary Audience | Other audiences |
Results and Impact | About 20 academics and postgraduate students attended a departmental seminar, which involved questions and discussion on various issues regarding firm learning, and more detailed discussions with academics and postgraduate students emerged subsequently. |
Year(s) Of Engagement Activity | 2021 |
URL | https://events.temple.edu/economics-fall-2021-seminar-series-tatsuro-senga |
Description | The 3rd Keio-Waseda Macro Workshop |
Form Of Engagement Activity | A talk or presentation |
Part Of Official Scheme? | No |
Geographic Reach | Regional |
Primary Audience | Other audiences |
Results and Impact | About 20 academics attended a workshop, where we had questions and discussions on various issues regarding firms' price setting and its macroeconomic implications, with more discussion and talks being emerged subsequently. |
Year(s) Of Engagement Activity | 2021 |
Description | The 3rd TWID International Finance Conference |
Form Of Engagement Activity | Participation in an activity, workshop or similar |
Part Of Official Scheme? | No |
Geographic Reach | International |
Primary Audience | Schools |
Results and Impact | Attended and discussed a paper on firm innovation and trade, which led to an invitation for a seminar talk in the next months. |
Year(s) Of Engagement Activity | 2022 |
URL | https://www.carf.e.u-tokyo.ac.jp/events/twid202207 |