Idiosyncratic Shocks and Aggregate Fluctuations in an Emerging Market

By Francesco Grigoli, Emiliano Luttini, Damiano Sandri

December 10, 2021

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Format: Chicago

Francesco Grigoli, Emiliano Luttini, and Damiano Sandri. Idiosyncratic Shocks and Aggregate Fluctuations in an Emerging Market, (USA: International Monetary Fund, 2021) accessed December 26, 2024

Disclaimer: 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.

Summary

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.

Subject: Economic sectors, Emerging and frontier financial markets, Exports, Financial markets, International trade, Manufacturing

Keywords: Aggregate fluctuation, Assessment of the contribution, Business cycle, Emerging and frontier financial markets, Emerging markets, Exports, Firm-destination sale series, Firm-level shocks, Granularity, Idiosyncratic shock, Manufacturing, Market concentration, Propagation

Publication Details

Pages:

20
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/289
Stock No:

WPIEA2021289
ISBN:

9781616354893
ISSN:

1018-5941

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