Assefa, AbrahamLapitskaya, DaryaUusküla, Lenno2022-07-052022-07-052022http://hdl.handle.net/10062/83092The paper studies the effects of technology shocks on the creation and destruction of firms. Using US data and a VAR model the paper finds Schumpeterian creative destruction for investment-specific technology shocks. A positive investment-specific technology shock increases the number of firms opening, but also leads to a higher number of firms closing. In contrast, labour-neutral technology shocks also benefit old firms. An increase in overall productivity leads to an increase in the number of new firms and a drop in the number of failures. Both margins contribute to an increase in the number of firms in the economy. A medium-scale DSGE model with endogenous entry and exit that is that is augmented with additional features is able to capture these stylised facts.enginfo:eu-repo/semantics/openAccessAttribution-NonCommercial-NoDerivatives 4.0 InternationalVAR modelDSGE modelfirm dynamicsproductivityfirm turnovertechnology shocksinvestment specific technology shocksinfo:eu-repo/semantics/article