Granularity in the current account

Miriam Koomen and Laurence Wicht

No 2025-08, Working Papers from Swiss National Bank

Abstract: We present new empirical evidence on the role of granularity in the current account (CA), using a unique and comprehensive firm-level dataset for Switzerland. We show that idiosyncratic shocks to large firms account for almost two thirds of the fluctuations in the headline CA and are the primary source of CA volatility. The granular effect is present across goods, services, and income components and persists over both short- and medium-term horizons. In addition to their direct impact, idiosyncratic shocks propagate through inter-firm linkages via input-output relationships and cross-product connections associated with multinational enterprise activity. Our findings challenge standard macroeconomic models that emphasize aggregate fundamentals, highlighting the importance of firm-level heterogeneity in explaining external imbalances and their fluctuations.

Keywords: Current account; Firm-level shocks; Granular fluctuations; Large firms (search for similar items in EconPapers)
JEL-codes: F23 F32 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2025-08

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