Debunking the granular origins of aggregate fluctuations: from real business cycles back to Keynes

Giovanni Dosi, Mauro Napoletano, Andrea Roventini, Tania Treibich*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

7 Citations (Web of Science)

Abstract

In this work we study the granular origins of business cycles and their possible underlying drivers. As shown by gabaix (econometrica 79:733–772, 2011), the skewed nature of firm size distributions implies that idiosyncratic (and independent) firm-level shocks may account for a significant portion of aggregate volatility. Yet, we question the original view grounded on “supply granularity”, as proxied by productivity growth shocks – in line with the real business cycle framework–, and we provide empirical evidence of a “demand granularity”, based on investment growth shocks instead. The role of demand in explaining aggregate fluctuations is further corroborated by means of a macroeconomic agent-based model of the “schumpeter meeting keynes” family dosi et al. (j econ dyn control 52:166–189, 2015). Indeed, the investigation of the possible microfoundation of rbc has led us to the identification of a sort of microfounded keynesian multiplier.
Original languageEnglish
Pages (from-to)67-90
Number of pages24
JournalJournal of Evolutionary Economics
Volume29
Issue number1
DOIs
Publication statusPublished - Mar 2019

Keywords

  • Business cycles
  • Granular residual
  • Granularity hypothesis
  • Agent-based models
  • Firm dynamics
  • Productivity growth
  • Investment growth
  • OUTPUT GROWTH
  • DISTRIBUTIONS
  • POLICIES
  • DYNAMICS
  • TRADE
  • FIRMS
  • SIZE

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