Do granular shocks generate sizeable aggregate volatility?

Antoine Mandel and Vipin P. Veetil ()
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Vipin P. Veetil: Economics Area, Indian Institute of Management Kozhikode

Journal of Evolutionary Economics, 2025, vol. 35, issue 1, No 3, 94 pages

Abstract: Abstract Over the last decade, numerous economists have argued that firm-level idiosyncratic productivity shocks can generate much of the observed aggregate volatility if firms are placed on a production network. We test this hypothesis using granular data on buyer–seller relationships between a large number of firms in the United States. Our estimates suggest that firm-level shocks generate about a tenth of the empirically observed aggregate volatility. Though the network mechanism is capable of amplifying firm-level shocks, the numerical values of the structural properties that generate this amplification do not prove to be sufficient.

Keywords: Production network; Productivity shocks; Aggregate volatility; Power law (search for similar items in EconPapers)
JEL-codes: C67 D57 E30 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s00191-025-00887-9

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