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Federal Reserve Bank of Chicago
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Firing costs and business cycle fluctuations
Marcelo Veracierto

This paper evaluates to what extent the introduction of firing costs can affect the aggregate dynamics of a neoclassical growth model with heterogeneous establishments. Similarly to the previous literature, firing costs are found to have large steady-state effects. However, they have no important effects on business cycle dynamics: Aggregate employment fluctuations are somewhat smaller when the firing costs are introduced, but most of the effects turn out to be insignificant.

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Marcelo Veracierto, Firing costs and business cycle fluctuations, Federal Reserve Bank of Chicago, Working Paper Series WP-03-29, 2003.
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Keywords: Business cycles
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