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CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology KTH/CESIS Working Paper Series in Economics and Institutions of Innovation

No 185:
Macroeconomic Factors and Swedish Small and Medium-Sized Manufacturing Firm Failure

A. Khalik Salman, Yvonne von Friedrichs and Ghazi Shukur ()

Abstract: This paper employs a time series cointegration approach to evaluate the relationship between manufacturing firm failure and macroeconomic factors for the Swedish manufacturing sector in the period 1986 – 2006. It uses quarterly data for this period. We found that in long run a firms’ failure is negatively related to the level of industrial activity, money supply, GNP and economic openness rate, and positively related to the real wage. Time series Error Correction Model (ECM) estimates suggest that macroeconomic risk factors impinge on firm failures on the same direction in both the short run and the long run and that adjustment to stabilise the relationship is quite slow.

Keywords: firm failure; macroeconomic factors; cointegration analysis; diagnostic tests; (follow links to similar papers)

JEL-Codes: D01; D02; (follow links to similar papers)

25 pages, August 26, 2009

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