Research

Working papers:

• Who Killed Business Dynamism in the U.S.?

with Bianca Barbaro and Patrizio Tirelli

Abstract We offer a new interpretation of the long-term dynamics in the U.S. firm entry rate. Its decline was the consequence of a persistent combination of adverse(favorable) productivity shocks to potential entrants(incumbents), while the long-term increase in price markups did not play a significant role. In spite of the "Schumpeterian" structure of our model, not all recessions had a "cleansing" effect, because the combination of shocks associated with the specific episodes had markedly different effects on the dispersion of firms' efficiency. Finally, the extensive margin allows to rationalize the procyclical pattern of TFP growth and its long-term decline.

• Whither Liquidity Shocks?

with Patrizio Tirelli

Abstract We show that popular models of (flight-to-)liquidity shocks have strongly counterfactual implications for asset returns and the composition of firms' liabilities, including the return spread between bank deposits and T-bills and the share of bank loans on corporate debt. Further, the implied estimate of the natural interest rate entails that the interest rate gap rose during recessions and fell thereafter. By including the relevant financial variables as observables in our empirical model, we can show that liquidity shocks played a negligible role and became virtually irrelevant after 2010. We also find that the slowdown in productivity growth, not liquidity shocks, caused the post-2010 fall in the natural rate.