Financial Crises, Firm-Level Shocks, and Large Downturns: Evidence From Greece

24 Pages Posted: 10 Jul 2020

See all articles by Stelios Giannoulakis

Stelios Giannoulakis

Athens University of Economics and Business

Plutarchos Sakellaris

Athens University of Economics and Business

Date Written: May 31, 2020

Abstract

How do firm-specific shocks contribute to large economic downturns associated with financial crises? Using a large and representative dataset on Greek firms covering all sectors of the economy over the period 2000-2014, we find that the contribution of firm-specific shocks to the volatility of aggregate sales growth increased substantially (about 30%) during the Greek financial crisis and dominated the contribution of macroeconomic and sectoral shocks. We also find that, throughout the sample period, inter-firm linkages are two and a half times as important as the direct effect of firm shocks in driving aggregate fluctuations. However, during the financial crisis, the Greek economy became more granular and the direct effect of firm-specific shocks had increased importance in driving aggregate volatility.

Keywords: Firm heterogeneity, financial crises, granularity, firm shocks, inter-firm linkages, networks

JEL Classification: D20, E32, F41

Suggested Citation

Giannoulakis, Stelios and Sakellaris, Plutarchos, Financial Crises, Firm-Level Shocks, and Large Downturns: Evidence From Greece (May 31, 2020). Available at SSRN: https://ssrn.com/abstract=3630244 or http://dx.doi.org/10.2139/ssrn.3630244

Stelios Giannoulakis

Athens University of Economics and Business ( email )

76 Patission Street
GR-10434 Athens
Greece

Plutarchos Sakellaris (Contact Author)

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece
+302108203304 (Phone)
+3012108203383 (Fax)

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