Decker, Ryan; D'Erasmo, Pablo; Moscoso Boedo, Herman J. - Federal Reserve Bank of Philadelphia - 2014
First Draft: November 1, 2011 We propose a theory of endogenous firm-level volatility over the business cycle based on endogenous market exposure. Firms that reach a larger number of markets diversify market-specific demand risk at a cost. The model is driven only by total factor productivity...