Turbulent_Business_Cycles

Speaker：Pengfei Wang, Chair Professor of Economics, Dean of PHBS

Host：Zeng Yan , Professor, Lingnan College

Time and Date：12:30, Oct. 17, 2023

Venue：Wong Ping-Lay Conference Room, Lingnan Hall (203) 

Language: English + Chinese

Abstract：

Firm-level evidence suggests that turbulence that reshuffles firms’ productivity rankings rises sharply in recessions. An increase in turbulence reallocates labor and capital from high- to low-productivity firms, reducing aggregate TFP and the stock market value of firms. A real business cycle model with heterogeneous firms and financial frictions can generate the observed macroeconomic and reallocation effects of turbulence. In the model, increased turbulence makes high-productivity firms less likely to remain productive, reducing their expected equity values and tightening their borrowing constraints relative to low-productivity firms. This leads to a reallocation that reduces aggregate TFP. Unlike uncertainty, turbulence changes both the conditional mean and the conditional variance of the firm productivity distribution, enabling a turbulence shock to generate a recession with synchronized declines in aggregate activities.

Profile of the speaker:

Chair Professor of Economics, Dean of PHBS

Biography

Ph.D. 2007 Cornell University, Economics

M.A. 2003 Peking University, Economics

B.A. 2000 Jilin University, Accounting

Research Interests: Macroeconomics, Financial Economics, Monetary Economics