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Do granular shocks generate sizeable aggregate volatility?

Author

Listed:
  • Antoine Mandel

    (Paris School of Economics, Université Paris 1 Pantheon-Sorbonne. Maison des Sciences Économiques)

  • Vipin P. Veetil

    (Economics Area, Indian Institute of Management Kozhikode)

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.

Suggested Citation

  • Antoine Mandel & Vipin P. Veetil, 2025. "Do granular shocks generate sizeable aggregate volatility?," Journal of Evolutionary Economics, Springer, vol. 35(1), pages 71-94, January.
    • Handle: RePEc:spr:joevec:v:35:y:2025:i:1:d:10.1007_s00191-025-00887-9
    DOI: 10.1007/s00191-025-00887-9
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    More about this item

    Keywords

    Production network; Productivity shocks; Aggregate volatility; Power law;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis

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