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The Granular Origins of Macroeconomic Fluctuations in Europe

Author

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  • Mr. Christian H Ebeke
  • Kodjovi M. Eklou

Abstract

This paper investigates the microeconomic origins of aggregate economic fluctuations in Europe. It examines the relevance of idiosyncratic shocks at the top 100 large firms (the granular shocks) in explaining aggregate macroeconomic fluctuations. The paper also assesses the strength of spillovers from large firms onto SMEs. Using firm-level data covering over 14 million firms and eight european countries (Austria, Belgium, Finland, France, Germany, Italy, Portugal and Spain), we find that: (i) 40 percent of the variance in GDP in the sample can be explained by idiosyncratic shocks at large firms; (ii) positive granular shocks at large firms spill over to domestic SMEs’ output, especially if SMEs’ balance sheets are healthy and if SMEs belong to the services and manufacturing sectors.

Suggested Citation

  • Mr. Christian H Ebeke & Kodjovi M. Eklou, 2017. "The Granular Origins of Macroeconomic Fluctuations in Europe," IMF Working Papers 2017/229, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2017/229
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    Citations

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    Cited by:

    1. Luis Pedauga & Francisco Sáez & Blanca L. Delgado-Márquez, 2022. "Macroeconomic lockdown and SMEs: the impact of the COVID-19 pandemic in Spain," Small Business Economics, Springer, vol. 58(2), pages 665-688, February.
    2. Jozef Konings & Galiya Sagyndykova & Venkat Subramanian & Astrid Volckaert, 2023. "The granular nature of emerging market economies: The case of Kazakhstan," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(2), pages 429-464, April.
    3. Elguellab Ali & Ezzahid Elhadj, 2023. "The granularity of the manufacturing sector : insights from a developing economy," Economics Bulletin, AccessEcon, vol. 43(3), pages 1254-1264.
    4. Jozef Konings & Galiya Sagyndykova & Venkat Subramanian & Astrid Volckaert, 2021. "The granular economy of Kazakhstan," Working Papers 2021/01, Nazarbayev University, Graduate School of Business.
    5. Nicholas Apergis & Sayantan Ghosh Dastidar, 2022. "The determinants of aggregate fluctuations: The role of firm‐borrowing channels," Manchester School, University of Manchester, vol. 90(1), pages 20-34, January.
    6. Palenzuela, Diego Rodriguez & Saiz, Lorena & Stoevsky, Grigor & Tóth, Máté & Warmedinger, Thomas & Grigoraș, Veaceslav, 2024. "The euro area business cycle and its drivers," Occasional Paper Series 354, European Central Bank.
    7. Carlos Melo Gouveia & Cristina Manteu & Sónia Cabral, 2020. "The granularity of Portuguese firm-level exports," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    8. Svetlana Popova, 2019. "Idiosyncratic shocks: estimation and the impact on aggregate fluctuations," Bank of Russia Working Paper Series wps46, Bank of Russia.

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