Organizational dynamics and aggregate fluctuations: The role of financial relationships

Keisuke Otsu, Masashi Saito

Research output: Contribution to journalArticlepeer-review


This paper constructs an estimated dynamic stochastic general equilibrium model to study the role of labor reallocation between production and organizational tasks within a firm in movements in measured TFP in Japan. Allocating more labor to organizational tasks strengthens the financial relationship with financial intermediaries and helps firms to mitigate a widening in credit spread during financial difficulties. However, doing so reduces the labor allocated to production tasks and hence the measured TFP. Our quantitative analysis indicates that labor reallocation contributes to the observed procyclicality in measured TFP. We also find that this mechanism amplifies and propagates the effects of exogenous shocks on aggregate activity.

Original languageEnglish
Pages (from-to)3044-3058
Number of pages15
JournalJournal of Economic Dynamics and Control
Issue number12
Publication statusPublished - 2013 Dec
Externally publishedYes


  • Aggregate fluctuations
  • Financial relationship
  • Labor reallocation
  • Organizational capital
  • TFP

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization
  • Applied Mathematics


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