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On the determination of the granular size of the economy

Author

Listed:
  • Blanco-Arroyo, Omar
  • Ruiz-Buforn, Alba
  • Vidal-Tomás, David
  • Alfarano, Simone

Abstract

Introducing the granular hypothesis, Gabaix (2011) shows that the idiosyncratic shocks of a few “granular” firms account for a significant fraction of aggregate fluctuations of the US business cycle. In the literature, however, the question of how many are the granular firms in an economy is left unanswered. Using Spanish data, we propose a novel methodology to calibrate the granular size of the economy, i.e. the number of granular firms.

Suggested Citation

  • Blanco-Arroyo, Omar & Ruiz-Buforn, Alba & Vidal-Tomás, David & Alfarano, Simone, 2018. "On the determination of the granular size of the economy," MPRA Paper 87599, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:87599
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    File URL: https://mpra.ub.uni-muenchen.de/87599/1/MPRA_paper_87599.pdf
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    References listed on IDEAS

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    1. del Rosal, Ignacio, 2013. "The granular hypothesis in EU country exports," Economics Letters, Elsevier, vol. 120(3), pages 433-436.
    2. Joachim Wagner, 2012. "The German manufacturing sector is a granular economy," Applied Economics Letters, Taylor & Francis Journals, vol. 19(17), pages 1663-1665.
    3. Xavier Gabaix, 2011. "The Granular Origins of Aggregate Fluctuations," Econometrica, Econometric Society, vol. 79(3), pages 733-772, May.
    4. Blank, Sven & Buch, Claudia M. & Neugebauer, Katja, 2009. "Shocks at large banks and banking sector distress: The Banking Granular Residual," Journal of Financial Stability, Elsevier, vol. 5(4), pages 353-373, December.
    5. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January.
    6. Charles R. Hulten, 1978. "Growth Accounting with Intermediate Inputs," Review of Economic Studies, Oxford University Press, vol. 45(3), pages 511-518.
    7. Julian di Giovanni & Andrei A. Levchenko & Isabelle Mejean, 2017. "Large Firms and International Business Cycle Comovement," American Economic Review, American Economic Association, vol. 107(5), pages 598-602, May.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Murilo Silva & Sergio Da Silva, 2020. "The Brazilian granular business cycle," Economics Bulletin, AccessEcon, vol. 40(1), pages 463-472.
    2. Blanco-Arroyo, Omar & Ruiz-Buforn, Alba & Vidal-Tomás, David & Alfarano, Simone, 2019. "Empresas granulares y desagregación regional: un análisis del caso español [Granular firms and regional disaggregation: an analysis of the Spanish case]," MPRA Paper 93913, University Library of Munich, Germany.
    3. Vidal-Tomás, David & Ruiz-Buforn, Aba & Blanco-Arroyo, Omar & Alfarano, Simone, 2020. "A cross-sectional analysis of growth and profit rate distribution: the Spanish case," MPRA Paper 102065, University Library of Munich, Germany.
    4. Carlos Melo Gouveia & Cristina Manteu & Sónia Cabral, 2020. "The granularity of Portuguese firm-level exports," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    5. Svetlana Popova, 2019. "Idiosyncratic shocks: estimation and the impact on aggregate fluctuations," Bank of Russia Working Paper Series wps46, Bank of Russia.

    More about this item

    Keywords

    Business cycle; idiosyncratic shocks; productivity; granular residual; granularity index;

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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