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Do Firm-Level Shocks Generate Aggregate Fluctuations?: A Cross-Country Analysis

Author

Listed:
  • Shuheng Lin
  • Francisca Perez

Abstract

This paper empirically examines the contribution of firm-level idiosyncratic shocks to aggregate fluctuations in the US, Germany, Canada, and the UK. We find shocks to large firms are of little relevance in the UK or Canada, but roughly explain one third of output fluctuations in the US and Germany. We argue the ability of the largest firms to transmit shocks is not universal, even when the firm size distribution is highly skewed as the theory suggests (Gabaix, 2011).

Suggested Citation

  • Shuheng Lin & Francisca Perez, 2019. "Do Firm-Level Shocks Generate Aggregate Fluctuations?: A Cross-Country Analysis," Working Papers 2019-10-20, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
    • Handle: RePEc:wyi:wpaper:002554
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    More about this item

    Keywords

    idiosyncratic shocks; aggregate fluctuations; firm size distribution; granular residual;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other

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