Granular Origin of Comovement in Fluctuations
49 Pages Posted: 16 Sep 2021
Date Written: September 13, 2021
We study the origin of comovement in economic fluctuations across regions in India through a unique administrative dataset on plant-level sales. Regional sales exhibit a high level of comovement that can be traced to a small number of large plants located in different regions, indicating a granular nature of regional comovement. Quantitatively, the top 10 plants from each region explain almost two-thirds of the total variation in regional comovement. We test three channels for comovement, viz. through aggregate regional trade, large granular plants, or granular multi-plant firms located in different regions. We nd that inter-region sales of multi-plant firms is the most dominant factor behind regional comovement and subsumes both aggregate trade and plant-level effects.
Keywords: Granularity, comovement, multi-plant rms.
JEL Classification: E32, E23, O47.
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