Title Page
INTERNATIONAL MONETARY FUND
Idiosyncratic Shocks and Aggregate Fluctuations in an Emerging Market
Francesco Grigoli, Emiliano Luttini, and Damiano Sandri
WP/21/289
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate.
The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
2021
November
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© 2021 International Monetary Fund
WP/21/289
IMF Working Paper
Research Department
Idiosyncratic Shocks and Aggregate Fluctuations in an Emerging Market
Prepared by Francesco Grigoli, Emiliano Luttini, and Damiano Sandri
Authorized for distribution by Maria Soledad Martinez Peria
December 2021
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: 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. Although quite large, this contribution is smaller than documented in previous studies based on advanced economies, despite a higher degree of market concentration in Chile. We show that this finding is explained by larger firms being less volatile and by weaker propagation effects across Chilean firms.
| JEL Classification Numbers: | E32, F41 |
| Keywords: | Business cycle, emerging markets, firm-level shocks, granularity, propagation |
| Author’s E-Mail Address: | fgrigoli@imf.org, eluttini@bcentral.cl, dsandri@imf.org |
| JEL Classification Numbers: | E32, F41 |
| Keywords: | Business cycle, emerging markets, firm-level shocks, granularity, propagation |
| Author’s E-Mail Address: | fgrigoli@imf.org, eluttini@bcentral.cl, dsandri@imf.org |
Title Page
Idiosyncratic Shocks and Aggregate Fluctuations in an Emerging Market*
Francesco Grigoli
IMF
Emiliano Luttini
Central Bank of Chile
Damiano Sandri
IMF and CEPR
November 19, 2021
Abstract
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. Although quite large, this contribution is smaller than documented in previous studies based on advanced economies, despite a higher degree of market concentration in Chile. We show that this finding is explained by larger firms being less volatile and by weaker propagation effects across Chilean firms.
Keywords: Business cycle, emerging markets, firm-level shocks, granularity, propagation
JEL Codes: E32, F41
