Idiosyncratic Shocks and Aggregate Fluctuations in an Emerging Market

Author/Editor:

Francesco Grigoli ; Emiliano Luttini ; Damiano Sandri

Publication Date:

December 10, 2021

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 provides the first assessment of the contribution of idiosyncratic shocks to aggregate fluctuations in an emerging market using confidential data on the universe of Chilean firms. We find that idiosyncratic shocks account for more than 40 percent of the volatility of aggregate sales. Although quite large, this contribution is smaller than documented in previous studies based on advanced economies, despite a higher degree of market concentration in Chile.We show that this finding is explained by larger firms being less volatile and by weaker propagation effects across Chilean firms.

Series:

Working Paper No. 2021/289

Frequency:

regular

English

Publication Date:

December 10, 2021

ISBN/ISSN:

9781616354893/1018-5941

Stock No:

WPIEA2021289

Pages:

20

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