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Factoring in the Micro: A Transaction‐Level Dynamic Factor Approach to the Decomposition of Export Volatility

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  • Matteo Barigozzi
  • Angelo Cuzzola
  • Marco Grazzi
  • Daniele Moschella

Abstract

This paper analyzes the export volatility sources estimating a dynamic factor model on transaction‐level data. Utilizing an exhaustive dataset of French export transactions from 1993 to 2017, we reconstruct the latent factors space associated with global and destination‐specific macroeconomic shocks through a Quasi‐Maximum likelihood approach which allows accommodating both the high share of missing values and the high dimensionality of the microeconomic time series. The estimated parameters are then used to derive a volatility decomposition of the aggregate and firm‐level export growth rates, highlighting structural spatial patterns and the role of geographical diversification in mitigating export risks.

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  • Matteo Barigozzi & Angelo Cuzzola & Marco Grazzi & Daniele Moschella, 2025. "Factoring in the Micro: A Transaction‐Level Dynamic Factor Approach to the Decomposition of Export Volatility," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 87(1), pages 155-184, February.
    • Handle: RePEc:bla:obuest:v:87:y:2025:i:1:p:155-184
    DOI: 10.1111/obes.12639
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