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On the determination of the granular size of the economy

Omar Blanco-Arroyo, Alba Ruiz-Buforn, David Vidal-Tomás and Simone Alfarano ()

Economics Letters, 2018, vol. 173, issue C, 35-38

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, in this paper we propose a novel methodology to calibrate the granular size of the economy, i.e. the number of granular firms.

Keywords: Business cycle; Idiosyncratic shocks; Productivity; Granular residual; Granularity index (search for similar items in EconPapers)
JEL-codes: E32 C20 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.econlet.2018.08.020

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