The Granular Origins of Macroeconomic Fluctuations in Europe

November 7, 2017

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Christian H Ebeke, and Kodjovi M. Eklou The Granular Origins of Macroeconomic Fluctuations in Europe, (USA: International Monetary Fund, 2017) accessed September 20, 2024

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.

Subject: Economic sectors, Financial sector policy and analysis, Labor productivity, Production, Productivity, Services sector, Small and medium enterprises, Spillovers

Keywords: Aggregate fluctuations, Balance Sheets, Europe, Firm size distribution, Firms sales, Global, Idiosyncratic shocks, Labor productivity, Large firm, Productivity, Productivity growth, Productivity shock, Services sector, Small and medium enterprises, SMEs, Spillovers, WP

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/229
Stock No:

WPIEA2017229
ISBN:

9781484324806
ISSN:

1018-5941

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