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

Author

Listed:
  • Lin Shuheng

    (The Hong Kong Polytechnic University, Kowloon, Hong Kong)

  • Pérez Francisca

    (Business School, 549476 Adolfo Ibanez University , Santiago, Chile)

Abstract

This paper tests the granular hypothesis introduced by Gabaix (2011. “The Granular Origins of Aggregate Fluctuations.” Econometrica 79 (3): 733–72) in the US, Germany, Canada, France, Japan, and the UK. We find that firm-level idiosyncratic shocks significantly impact aggregate fluctuations in only three of the six countries analyzed. Compared to the US, Japan and Germany, the UK, France, and Canada show greater granularity, but also a negligible firm-level contribution to aggregate volatility. Additional results look at the role of the transportation sector as a potential driver of granular effects in the US, Germany and Japan.

Suggested Citation

  • Lin Shuheng & Pérez Francisca, 2025. "Do Firm-Level Shocks Generate Aggregate Fluctuations? A Cross-Country Analysis," The B.E. Journal of Macroeconomics, De Gruyter, vol. 25(1), pages 45-79.
    • Handle: RePEc:bpj:bejmac:v:25:y:2025:i:1:p:45-79:n:1002
    DOI: 10.1515/bejm-2024-0017
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    More about this item

    Keywords

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

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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