AcademicsWorking Papers

Do Firm-Level Shocks Generate Aggregate Fluctuations?: A Cross-Country Analysis
Shuheng Lin, Francisca Perez
#002554 20191230 () Views:25004
This paper empirically examines the contribution of firm-level idiosyncratic shocks to aggregate fluctuations in the US, Germany, Canada, and the UK. We find shocks to large firms are of little relevance in the UK or Canada, but roughly explain one third of output fluctuations in the US and Germany. We argue the ability of the largest firms to transmit shocks is not universal, even when the firm size distribution is highly skewed as the theory suggests (Gabaix, 2011).
JEL-Codes: D20; E32; O49
Keywords: idiosyncratic shocks, aggregate fluctuations, firm size distribution, granular residual