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Foreign Shocks as Granular Fluctuations

Author

Listed:
  • Julian di Giovanni
  • Andrei A. Levchenko
  • Isabelle Mejean

Abstract

This paper uses a dataset covering the universe of French firm-level value-added, imports, and exports and a quantitative multicountry heterogeneous firm model to study the propagation of foreign shocks to the domestic economy. Foreign shocks are transmitted primarily through large firms as they are the most likely to trade internationally. At the micro level, the majority of the GDP impact of foreign shocks is accounted for by the “foreign granular residual,” a statistic capturing larger firms’ greater responsiveness to foreign shocks. At the macro level, firm heterogeneity attenuates the GDP impact of foreign shocks relative to a homogeneous firm counterfactual.

Suggested Citation

  • Julian di Giovanni & Andrei A. Levchenko & Isabelle Mejean, 2024. "Foreign Shocks as Granular Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 132(2), pages 391-433.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/726235
    DOI: 10.1086/726235
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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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