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

Shuheng Lin () and Francisca Perez ()

No 2019-10-20, Working Papers from Wang Yanan Institute for Studies in Economics (WISE), Xiamen University

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).

Keywords: idiosyncratic shocks; aggregate fluctuations; firm size distribution; granular residual (search for similar items in EconPapers)
JEL-codes: D20 E32 O49 (search for similar items in EconPapers)
Date: 2019-12-30
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Persistent link: https://EconPapers.repec.org/RePEc:wyi:wpaper:002554

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