Download or read book Idiosyncratic Shocks and Aggregate Fluctuations in an Emerging Market written by Mr. Francesco Grigoli and published by International Monetary Fund. This book was released on 2021-12-10 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides the first assessment of the contribution of idiosyncratic shocks to aggregate fluctuations in an emerging market using confidential data on the universe of Chilean firms. We find that idiosyncratic shocks account for more than 40 percent of the volatility of aggregate sales. Although quite large, this contribution is smaller than documented in previous studies based on advanced economies, despite a higher degree of market concentration in Chile.We show that this finding is explained by larger firms being less volatile and by weaker propagation effects across Chilean firms.
Download or read book Firm specific Shocks and Aggregate Fluctuations written by Leonid Karasik and published by . This book was released on 2016 with total page 15 pages. Available in PDF, EPUB and Kindle. Book excerpt: "In order to understand what drives aggregate fluctuations, many macroeconomic models point to aggregate shocks and discount the contribution of firm-specific shocks. Recent research from other developed countries, however, has found that aggregate fluctuations are in part driven by idiosyncratic shocks to large firms. Using data on Canadian firms, this paper examines the contribution of large firms to industry-level fluctuations in gross output, investment and employment in the manufacturing sector. The data suggest that shocks to large firms can explain as much as 46% and 37% of the fluctuations in gross output and investment, respectively, but do not contribute to fluctuations in employment"--Abstract.
Download or read book Are Firm Level Idiosyncratic Shocks Important for U S Aggregate Volatility written by Chen Yeh and published by . This book was released on 2016 with total page 73 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper quantitatively assesses whether firm-specific shocks can drive the U.S. business cycle. Firm-specific shocks to the largest firms can directly contribute to aggregate fluctuations whenever the firm size distribution is fat-tailed giving rise to the granular hypothesis. I use a novel, comprehensive data set compiled from administrative sources that contains the universe of firms and trade transactions, and find that the granular hypothesis accounts at most for 16 percent of the variation in aggregate sales growth. This is about half of that found by previous studies that imposed Gibrat's law where all firms are equally volatile regardless of their size. Using the full distribution of growth rates among U.S. firms, I find robust evidence of a negative relationship between firm-level volatility and size, i.e. the size-variance relationship. The largest firms (whose shocks drive granularity) are the least volatile under the size-variance relationship, thus their influence on aggregates is mitigated. I show that by taking this relationship into account the effect of firm-specific shocks on observed macroeconomic volatility is substantially reduced. I then investigate several plausible mechanisms that could explain the negative size-variance relationship. After empirically ruling out some of them, I suggest a “market power” channel in which large firms face smaller price elasticities and therefore respond less to a given sized productivity shock than small firms do. I provide direct evidence for this mechanism by estimating demand elasticities among U.S. manufactures. Lastly, I construct an analytically tractable framework that is consistent with several empirical regularities related to firm size.
Download or read book Technology Shocks and Aggregate Fluctuations written by Mr.Pau Rabanal and published by International Monetary Fund. This book was released on 2004-12-01 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: Our answer: Not so well. We reached that conclusion after reviewing recent research on the role of technology as a source of economic fluctuations. The bulk of the evidence suggests a limited role for aggregate technology shocks, pointing instead to demand factors as the main force behind the strong positive comovement between output and labor input measures.
Download or read book Firms Destinations and Aggregate Fluctuations written by Julian Di Giovanni and published by . This book was released on 2014 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses a database covering the universe of French firms for the period 1990--2007 to provide a forensic account of the role of individual firms in generating aggregate fluctuations. We set up a simple multi-sector model of heterogeneous firms selling to multiple markets to motivate a theoretically-founded decomposition of firms' annual sales growth rate into different components. We find that the firm-specific component contributes substantially to aggregate sales volatility, mattering about as much as the components capturing shocks that are common across firms within a sector or country. We then decompose the firm-specific component to provide evidence on two mechanisms that generate aggregate fluctuations from microeconomic shocks highlighted in the recent literature: (i) when the firm size distribution is fat-tailed, idiosyncratic shocks to large firms directly contribute to aggregate fluctuations; and (ii) aggregate fluctuations can arise from idiosyncratic shocks due to input-output linkages across the economy. Firm linkages are approximately three times as important as the direct effect of firm shocks in driving aggregate fluctuations.
Download or read book The Granular Origins of Macroeconomic Fluctuations in Europe written by Mr.Christian H Ebeke and published by International Monetary Fund. This book was released on 2017-11-07 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the microeconomic origins of aggregate economic fluctuations in Europe. It examines the relevance of idiosyncratic shocks at the top 100 large firms (the granular shocks) in explaining aggregate macroeconomic fluctuations. The paper also assesses the strength of spillovers from large firms onto SMEs. Using firm-level data covering over 14 million firms and eight european countries (Austria, Belgium, Finland, France, Germany, Italy, Portugal and Spain), we find that: (i) 40 percent of the variance in GDP in the sample can be explained by idiosyncratic shocks at large firms; (ii) positive granular shocks at large firms spill over to domestic SMEs’ output, especially if SMEs’ balance sheets are healthy and if SMEs belong to the services and manufacturing sectors.
Download or read book Firm Dynamics and the Origins of Aggregate Fluctuations written by Andrea Stella and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Firm Specific Shocks and Aggregate Fluctuations in the Canadian Manufacturing Sector 2000 to 2012 written by and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The weighted average of these firm-specific shocks to sales is called the 'granular shock.' The contribution of the granular shock to aggregate fluctuations in industry sales is obtained from the explanatory power of the regression of the growth of industry sales on the granular shock. [...] In the cases of sales and employment growth, the standard deviations of the equal-share components more closely resemble in magnitude the standard deviations of the aggregate growth rates. [...] Mathematically, it is the difference between the growth rate of the firm and the average growth rate of the M j,t. [...] The third method is a hybrid of the two; it uses information on all firms to construct the macro shock g M. to derive the j ,t firm-level shock M , yet uses only the 10 largest firms to construct the granular shock G. This i,t j,t measure enables researchers to follow DLM's approach in measuring the macro shock, while still allowing for the study of shocks to the largest firms. [...] At first glance, it is difficult to determine whether the explanatory power doubles because of the inclusion of shocks to smaller firms or because of the difference in the measurement of firm-specific shocks.
Download or read book Credit Shocks and Aggregate Fluctuations in an Economy with Production Heterogeneity written by Aubhik Khan and published by . This book was released on 2011 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the cyclical implications of credit market imperfections in a calibrated dynamic, stochastic general equilibrium model wherein firms face persistent shocks to aggregate and individual productivity. In our model economy, optimal capital reallocation is distorted by two frictions: collateralized borrowing and partial capital irreversibility yielding (S, s) firm-level investment policies. In the presence of persistent heterogeneity in capital, debt and total factor productivity, the effects of a financial shock are amplified and propagated through large and long-lived disruptions to the distribution of capital that, in turn, imply large and persistent reductions in aggregate total factor productivity. We find that an unanticipated tightening in borrowing conditions can, on its own, generate a large recession far more persistent than the financial shock itself. This recession, and the subsequent recovery, is distinguished both quantitatively and qualitatively from that driven by exogenous shocks to total factor productivity.
Download or read book The Granular Origins of Macroeconomic Fluctuations in Europe written by Mr.Christian H Ebeke and published by International Monetary Fund. This book was released on 2017-11-07 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the microeconomic origins of aggregate economic fluctuations in Europe. It examines the relevance of idiosyncratic shocks at the top 100 large firms (the granular shocks) in explaining aggregate macroeconomic fluctuations. The paper also assesses the strength of spillovers from large firms onto SMEs. Using firm-level data covering over 14 million firms and eight european countries (Austria, Belgium, Finland, France, Germany, Italy, Portugal and Spain), we find that: (i) 40 percent of the variance in GDP in the sample can be explained by idiosyncratic shocks at large firms; (ii) positive granular shocks at large firms spill over to domestic SMEs’ output, especially if SMEs’ balance sheets are healthy and if SMEs belong to the services and manufacturing sectors.
Download or read book Firm Specific Shocks and Aggregate Volatility written by Chen Yeh and published by . This book was released on 2017 with total page 124 pages. Available in PDF, EPUB and Kindle. Book excerpt: The last part of this dissertation investigates several plausible mechanisms that could explain the negative size-variance relationship. After empirically ruling out some of them, I suggest a "market power" channel in which large firms face smaller price elasticities and therefore respond less to a given-sized productivity shock than small firms do. I provide direct evidence for this mechanism by estimating demand elasticities among U.S. manufactures. Furthermore, this channel is consistent with the observation that markups are increasing in size. The results of a structural estimation procedure indicate that this is indeed the case for U.S. manufactures. Lastly, these robust empirical findings can be rationalized in an analytically tractable framework featuring random growth and a Kimball demand aggregator.
Download or read book Entry Exit Firm Dynamics and Aggregate Fluctuations written by Gian Luca Clementi and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Do firm entry and exit play a major role in shaping aggregate dynamics? Our answer is yes. Entry and exit propagate the effects of aggregate shocks. In turn, this results in greater persistence and unconditional variation of aggregate time-series. These are features of the equilibrium allocation in Hopenhayn (1992)'s model of equilibrium industry dynamics, amended to allow for investment in physical capital and aggregate fluctuations. In the aftermath of a positive productivity shock, the number of entrants increases. The new firms are smaller and less productive than the incumbents, as in the data. As the common productivity component reverts to its unconditional mean, the new entrants that survive become more productive over time, keeping aggregate efficiency higher than in a scenario without entry or exit.
Download or read book The granular origins of aggregate fluctuations written by Xavier Gabaix and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: This paper proposes that idiosyncratic firm-level fluctuations can explain an important part of aggregate shocks, and provide a microfoundation for aggregate productivity shocks. Existing research has focused on using aggregate shocks to explain business cycles, arguing that individual firm shocks average out in aggregate. I show that this argument breaks down if the distribution of firm sizes is fat-tailed, as documented empirically. The idiosyncratic movements of the largest 100 firms in the US appear to explain about one third of variations in output and the Solow residual. This "granular" hypothesis suggests new directions for macroeconomic research, in particular that macroeconomic questions can be clarified by looking at the behavior of large firms. This paper's ideas and analytical results may also be useful to think about the fluctuations of other economic aggregates, such as exports or the trade balance
Download or read book Firm specific Shocks and Aggregate Fluctuations in the Canadian Manufacturing Sector 2000 to 2012 written by Danny Leung and published by . This book was released on 2016 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays on Stochastic Volatility and Aggregate Fluctuations written by Guanliang Hu and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent papers have pointed to the role of fluctuation in the second-moment of firm productivity (or demand) in generating aggregate fluctuations. However, the commonly used model which assumes an AR(1) process of productivity has two implications that are inconsistent with data: (i) the economy recovers from a downturn induced by an increase in the second-moment much faster in the model than in SVAR; and (ii) in the model, a large increase in the second-moment leads to an increase in investment rate dispersion, which is not observed in the data. To address these inconsistencies, I propose a general information structure which allows for a rich specification of second-moment shocks and find one of them that can resolve these inconsistencies. In chapter 1, using data on US publicly traded firms, I document the stylized facts that firms experience larger changes in productivity will have larger uncertainty in future and that this association decreases over time. Motivated by these facts, I propose a general information structure, which incorporates a learning process, and embed it into a heterogeneous-firm RBC model. I then consider an economy without aggregate shocks and show that this information structure can explain well these facts both qualitatively and quantitatively. In chapter 2, based on the model framework developed in chapter 1, I study four types of second-moment shocks: shocks to the second-moment of persistent productivity (i.e., the standard formation in the literature), shocks to frequency of persistent productivity change, shocks to the second-moment of transitory productivity, and shocks to the second-moment of signal noises. Specifically, I estimate four models, each of which has one type of second-moment shocks. I find that the model that best fits data on firm-level and aggregate uncertainty is the one that has shocks to the second-moment of transitory productivity. In chapter 3, I explore the quantitative implications of each model estimated in chapter 2. I find the model with the best fit solves the aforementioned inconsistencies with the data. This result suggests a new reasonable way to model fluctuation in uncertainty.
Download or read book Do Sector specified Shocks Explain Aggregate Fluctuations written by and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Hysteresis and Business Cycles written by Ms.Valerie Cerra and published by International Monetary Fund. This book was released on 2020-05-29 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.
