Firm Dynamics and the Origins of Aggregate Fluctuations

36 Pages Posted: 24 Feb 2013 Last revised: 5 Nov 2014

See all articles by Andrea Stella

Andrea Stella

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: November 4, 2014

Abstract

What drives aggregate fluctuations? In order to test recent theories on the importance of macroeconomic and firm-level shocks, I estimate a dynamic factor model with firm-level data. Each time series, the sales growth of a specific firm, is decomposed in an unobserved common macroeconomic component and in a residual that I interpret as an idiosyncratic firm-level component. The empirical results suggest that idiosyncratic shocks explain most of firm dynamics, but have no role in explaining U.S. GDP growth fluctuations.

Keywords: Business Cycles, Firm Dynamics, Granular Residual, Dynamic Factor Models

JEL Classification: E32, E37, D20, C30

Suggested Citation

Stella, Andrea, Firm Dynamics and the Origins of Aggregate Fluctuations (November 4, 2014). Available at SSRN: https://ssrn.com/abstract=2222746 or http://dx.doi.org/10.2139/ssrn.2222746

Andrea Stella (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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