Idiosyncratic shocks: estimation and the impact on aggregate fluctuations

No wps46, Bank of Russia Working Paper Series from Bank of Russia

Abstract: Recently, economic granularity has been the focus of researchers' attention. Latest empirical works evaluate the granularity of various economies in terms of whether shocks to individual companies can affect volatility of macroeconomic variables. Studies of developed countries show that a large part of aggregate fluctuations arises from idiosyncratic shocks to companies because of their size or close linkages between them. Using the microdata of Russian firms on sales over the period from 1999 to 2017, we test the hypothesis that the Russian economy is granular. Here we found that idiosyncratic shocks contribute significantly to total sales volatility. It was also revealed that the effect of linkages is more important in aggregate volatility estimation, but not for the top-100 largest firms. These findings are important for understanding business cycle drivers and for estimation the impact of macroeconomic policies.

Keywords: firm-level dynamics; granular residuals; idiosyncratic shocks; aggregate fluctuations; industrial production. (search for similar items in EconPapers)
JEL-codes: D20 E32 L14 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2019-09
New Economics Papers: this item is included in nep-bec, nep-cis, nep-mac and nep-tra
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Citations: View citations in EconPapers (4)

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