Open AccessPosted Content
The Granular Origins of Aggregate Fluctuations
Reads0
Chats0
TLDR
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
Citations
More filters
Journal ArticleDOI
The Network Origins of Aggregate Fluctuations
Daron Acemoglu,Daron Acemoglu,Daron Acemoglu,Vasco M. Carvalho,Vasco M. Carvalho,Vasco M. Carvalho,Asuman Ozdaglar,Alireza Tahbaz-Salehi,Alireza Tahbaz-Salehi +8 more
TL;DR: In this paper, the authors argue that in the presence of intersectoral input-output linkages, microeconomic idiosyncratic shocks may lead to aggregate fluctuations and that the rate at which aggregate volatility decays is determined by the structure of the network capturing such linkages.
ReportDOI
Power Laws in Economics and Finance
TL;DR: In this paper, a review of empirical power laws regarding income and wealth, the size of cities and firms, stock market returns, trading volume, international trade, and executive pay is presented.
Journal ArticleDOI
Input Specificity and the Propagation of Idiosyncratic Shocks in Production Networks
TL;DR: In this paper, the authors examine whether firm-level idiosyncratic shocks propagate in production networks and find that affected suppliers impose substantial output losses on their customers, especially when they produce specific inputs.
Journal ArticleDOI
Institutional Investors and Stock Market Volatility
TL;DR: In this paper, the authors present a theory of excess stock market volatility, in which market movements are due to trades by very large institutional investors in relatively illiquid markets, and derive the optimal trading behavior of thse investors, which allows them to provide a unified explanation for apparently disconnected empirical regularities in returns, trading volume and investor size.
Journal ArticleDOI
Intermediate Goods and Weak Links in the Theory of Economic Development
TL;DR: In this paper, linkages between firms through intermediate goods deliver a multiplier similar to the one associated with capital in a neoclassical growth model, and the intermediate goods share of output is about one-half, this multiplier is substantial.
References
More filters
Journal ArticleDOI
Forecasting Using Principal Components From a Large Number of Predictors
James H. Stock,Mark W. Watson +1 more
TL;DR: In this paper, the authors consider forecasting a single time series when there are many predictors (N) and time series observations (T), and they show that the difference between the feasible forecasts and the infeasible forecasts constructed using the actual values of the factors converges in probability to 0 as both N and T grow large.
Journal ArticleDOI
On a class of skew distribution functions
TL;DR: In this paper, the authors analyse a class of distribution functions that appear in a wide range of empirical data-particularly data describing sociological, biological and economic phenomena-and look for an explanation of the observed close similarities among the five classes of distributions listed above.
Posted Content
Job Creation and Destruction
TL;DR: The most complete plant-level data source currently available, the Longitudinal Research Data constructed by the Census Bureau, is used in this article to study the U.S. manufacturing sector from 1972 to 1988 and develop a statistical portrait of the microeconomic adjustments to the many economic events that affect businesses and workers.
Journal ArticleDOI
Zipf's Law for Cities: An Explanation
TL;DR: In this paper, it was shown that, at least in the upper tail, all cities follow some proportional growth process (this appears to be verified empirically), which automatically leads their distribution to converge to Zipf's law.
Posted Content
What is an Oil Shock
TL;DR: This paper used a flexible approach to characterize the nonlinear relation between oil price changes and GDP growth and reported clear evidence of nonlinearity, consistent with earlier claims in the literature that oil price increases are much more important than oil price decreases, and increases have significantly less predictive content if they simply correct earlier decreases.