{
  "title": "Idiosyncratic Shocks and Aggregate Fluctuations in an Emerging Market",
  "publication": "IMF Working Papers, December 10, 2021",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2021/12/10/idiosyncratic-shocks-and-aggregate-fluctuations-in-an-emerging-market-510839",
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  "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.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Authors: Francesco Grigoli, Emiliano Luttini, Damiano Sandri\n- Publication: IMF Working Papers, Working Paper No. 2021/289\n- Date: December 10, 2021\n- Pages: 20\n- DOI: https://doi.org/10.5089/9781616354893.001\n- ISBN: 9781616354893\n- ISSN: 1018-5941"
    },
    {
      "heading": "Main findings",
      "content": "- Idiosyncratic shocks account for more than 40 percent of the volatility of aggregate sales in the studied emerging market.\n- The contribution of idiosyncratic shocks to aggregate volatility in this emerging market is smaller than documented in previous studies based on advanced economies.\n- Despite a higher degree of market concentration in Chile, the smaller contribution is explained by:\n  - Larger firms being less volatile.\n  - Weaker propagation effects across Chilean firms."
    },
    {
      "heading": "Method and data",
      "content": "- The 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.\n- Analysis leverages firm-level data, including firm-destination sale series and firm-level shocks, to evaluate granularity and propagation mechanisms."
    },
    {
      "heading": "Implications and interpretation",
      "content": "- High market concentration alone does not imply larger aggregate volatility from idiosyncratic shocks when large firms exhibit lower volatility.\n- Weaker interfirm propagation of shocks can meaningfully reduce the aggregate impact of idiosyncratic disturbances in an emerging market context."
    },
    {
      "heading": "Subjects and keywords",
      "content": "- Subjects: Economic sectors, Emerging and frontier financial markets, Exports, Financial markets, International trade, Manufacturing\n- Keywords: aggregate fluctuation, assessment of the contribution, Business cycle, Emerging and frontier financial markets, emerging markets, Exports, firm-destination sale series, firm-level shocks, granularity, idiosyncratic shock, Manufacturing, market concentration, propagation\n\nSource: IMF Working Paper No. 2021/289 — \"Idiosyncratic Shocks and Aggregate Fluctuations in an Emerging Market\" by Francesco Grigoli, Emiliano Luttini, and Damiano Sandri (December 10, 2021).\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2021/12/10/idiosyncratic-shocks-and-aggregate-fluctuations-in-an-emerging-market-510839"
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    "Authors: Francesco Grigoli, Emiliano Luttini, Damiano Sandri",
    "Published: December 10, 2021",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781616354893.001",
    "Authors: Francesco Grigoli, Emiliano Luttini, Damiano Sandri",
    "Publication: IMF Working Papers, Working Paper No. 2021/289",
    "Date: December 10, 2021",
    "Pages: 20",
    "DOI: https://doi.org/10.5089/9781616354893.001",
    "ISBN: 9781616354893",
    "ISSN: 1018-5941",
    "Idiosyncratic shocks account for more than 40 percent of the volatility of aggregate sales in the studied emerging market.",
    "The contribution of idiosyncratic shocks to aggregate volatility in this emerging market is smaller than documented in previous studies based on advanced economies.",
    "Despite a higher degree of market concentration in Chile, the smaller contribution is explained by:",
    "The 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.",
    "Analysis leverages firm-level data, including firm-destination sale series and firm-level shocks, to evaluate granularity and propagation mechanisms.",
    "High market concentration alone does not imply larger aggregate volatility from idiosyncratic shocks when large firms exhibit lower volatility.",
    "Weaker interfirm propagation of shocks can meaningfully reduce the aggregate impact of idiosyncratic disturbances in an emerging market context.",
    "Subjects: Economic sectors, Emerging and frontier financial markets, Exports, Financial markets, International trade, Manufacturing",
    "Keywords: aggregate fluctuation, assessment of the contribution, Business cycle, Emerging and frontier financial markets, emerging markets, Exports, firm-destination sale series, firm-level shocks, granularity, idiosyncratic shock, Manufacturing, market concentration, propagation",
    "**Working Paper**"
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