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

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.
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Giovanni Dosi, Mauro Napoletano, Andrea Roventini, Tania Treibich. Debunking the granular origins of aggregate fluctuations : from real business cycles back to Keynes. Journal of Evolutionary Economics, 2019, 29 (1), pp.67 - 90. ⟨hal-02557845⟩

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