Idiosyncratic Shocks and Aggregate Fluctuations in an Emerging Market

Francesco Grigoli (), Emiliano Luttini and Damiano Sandri

No 2021/289, IMF Working Papers from International Monetary Fund

Abstract: This paper provides the first assessment of the contribution of idiosyncratic shocks to aggregate fluctuations in an emerging market using confidential data on the universe of Chilean firms. We find that idiosyncratic shocks account for more than 40 percent of the volatility of aggregate sales. Although quite large, this contribution is smaller than documented in previous studies based on advanced economies, despite a higher degree of market concentration in Chile.We show that this finding is explained by larger firms being less volatile and by weaker propagation effects across Chilean firms.

Keywords: Business cycle; emerging markets; firm-level shocks; granularity; propagation; idiosyncratic shock; aggregate fluctuation; market concentration; firm-destination sale series; assessment of the contribution; Emerging and frontier financial markets; Manufacturing; Exports (search for similar items in EconPapers)
Pages: 20
Date: 2021-12-10
New Economics Papers: this item is included in nep-bec, nep-cwa and nep-mac
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Related works:
Journal Article: Idiosyncratic shocks and aggregate fluctuations in an emerging market (2023)
Working Paper: Idiosyncratic Shocks and Aggregate Fluctuations in an Emerging Market (2022)
Working Paper: Idiosyncratic Shocks and Aggregate Fluctuations in an Emerging Market (2021)
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