Bank of Lithuania
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2018-05-14

No 7. Mihnea Constantinescu, Aurelija Proškutė. Firm heterogeneity and macroeconomic dynamics: a datadriven investigation

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In this paper we offer a unique firm-level view of the empirical regularities underlying the evolution of the Lithuanian economy over the period of 2000 to 2014. Employing a novel data-set, we investigate key distributional moments of both the financial and real characteristics of Lithuanian firms. We focus in particular on the issues related to productivity, firm birth and death and the associated employment creation and destruction across industries, firm sizes and trade status (exporting vs. non-exporting). We refrain from any structural modeling attempt in order to map out the key economic processes across industries and selected firm characteristics. We uncover similar empirical regularities as already highlighted in the literature: trade participation has substantial benefits on firm productivity, the 2008 recession has had a cleansing effect on the non-tradable sector, firm birth and death are highly pro-cyclical. The richness of the dataset allows us to produce additional insights such as the change in the composition of assets and liabilities over the business cycles (tilting both liabilities and assets towards the short-term) or the increasing share of exporting firms but the constant share of importing ones since 2000.

JEL Codes: D22, D24, E30, J21, J24, J30, L11, L25.

The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

Mihnea Constantinescu, Aurelija Proškutė, productivity, firm dynamism, job creation and destruction, firm heterogeneity, Lithuanian economy