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The Granular Origins of Aggregate Fluctuations
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This article showed that idiosyncratic firm-level fluctuations can explain an important part of aggregate shocks, and provide a micro-foundation for aggregate productivity shocks, arguing that individual firm shocks average out in aggregate.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.read more
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Macroeconomics with Heterogeneous Agents and Input-Output Networks
David Baqaee,Emmanuel Farhi +1 more
TL;DR: In this article, a broad class of disaggregated general equilibrium models with Heterogeneous Agents and Input-Output networks (HA-IO) is introduced, and the authors characterize their properties through two sets of results describing the propagation and the aggregation of shocks.
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Institutions and Concentration
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The Economic Impact of Index Investing
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The transmission of fluctuation among price indices based on Granger causality network
Qingru Sun,Qingru Sun,Xiangyun Gao,Xiangyun Gao,Shaobo Wen,Shaobo Wen,Zhihua Chen,Zhihua Chen,Xiaoqing Hao,Xiaoqing Hao +9 more
TL;DR: Wang et al. as discussed by the authors provided a method of statistical physics to analyze the fluctuation of transmission by constructing Granger causality network among price indices (PIGCN) from a systematical perspective.
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Granular sources of the Italian business cycle
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References
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