The Granular Origins of Macroeconomic Fluctuations in Europe

Author/Editor:

Christian H Ebeke ; Kodjovi M. Eklou

Publication Date:

November 7, 2017

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

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.

Series:

Working Paper No. 17/229

English

Publication Date:

November 7, 2017

ISBN/ISSN:

9781484324806/1018-5941

Stock No:

WPIEA2017229

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

33

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