ABSTRACT
This paper analyzes the macroeconomic factors that influence the establishment of new firms in the United States from 1992:Q2 to 2012:Q4 by using the Johansen-Juselius cointegration technique and an error correction model to determine the existence of a long-run and the short-run dynamics of the system, respectively. Results show that there exists at least one cointegrating equation between new business formation, real GDP, unemployment level, price level, per capita disposable personal capita income, home ownership rate, and social security benefits. Moreover, the study reveals that any deviation from the long-run equilibrium relationship, due to exogenous shocks in a given quarter, is adjusted over the following period. The expected negative sign of the error correction term and its highly statistical significance level provide further evidence of a long-run equilibrium relationship among the determinants of business creation.
Keywords
Macroeconomic, business, conitegration analysis