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Debunking the granular origins of aggregate fluctuations: from real business cycles back to Keynes

Giovanni Dosi (), Mauro Napoletano (), Andrea Roventini and Tania Treibich ()

Sciences Po publications from Sciences Po

Abstract: In this work we study the granular origins of business cycles and their possible underlying drivers. As shown by Gabaix (Econometrica 79:733–772, 2011), the skewed nature of firm size distributions implies that idiosyncratic (and independent) firm-level shocks may account for a significant portion of aggregate volatility. Yet, we question the original view grounded on “supply granularity”, as proxied by productivity growth shocks – in line with the Real Business Cycle framework–, and we provide empirical evidence of a “demand granularity”, based on investment growth shocks instead. The role of demand in explaining aggregate fluctuations is further corroborated by means of a macroeconomic Agent-Based Model of the “Schumpeter meeting Keynes” family Dosi et al. (J Econ Dyn Control 52:166–189, 2015). Indeed, the investigation of the possible microfoundation of RBC has led us to the identification of a sort of microfounded Keynesian multiplier.

Keywords: Business cycles; Granular residual; Granularity hypothesis; Agent-based models; Firm dynamics; Productivity growth; Investment growth (search for similar items in EconPapers)
JEL-codes: C63 E12 E22 E32 O4 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-bec, nep-cmp, nep-hme, nep-mac, nep-ore, nep-pke and nep-tid
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Published in Journal of Evolutionary Economics, 2019, vol. 29, pp.67-90

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Journal Article: Debunking the granular origins of aggregate fluctuations: from real business cycles back to Keynes (2019) Downloads
Working Paper: Debunking the granular origins of aggregate fluctuations: from real business cycles back to Keynes (2019) Downloads
Working Paper: The Debunking the Granular origins of Aggregate fluctuations: from real Business Cycles back to Keynes (2018) Downloads
Working Paper: The Debunking the Granular Origins of Aggregate Fluctuations: From Real Business Cycles back to Keynes (2018) Downloads
Working Paper: Debunking the Granular Origins of Aggregate Fluctuations: From Real Business Cycles back to Keynes (2018) Downloads
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