Country Size, International Trade, and Aggregate Fluctuations in Granular Economies
Bibliographic Data
| ID | 10180451 |
|---|---|
| Authors | Julian di Giovanni (0000-0002-6864-6401, International Monetary Fund), Andrei A Levchenko (0000-0001-9087-7911, National Bureau of Economic Research) |
| Year | 2012 |
| Volume | 120 |
| Issue | 6 |
| Pages | 1083-1132 |
| Publication date | 2012-12-01 |
| Peer Reviewed | Yes |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Political Economy (JOURNAL) |
| Journal identifiers | ISSN: 0022-3808 • E-ISSN: 1537-534X |
| Publisher | University of Chicago Press (PUBLISHER • US) |
| DOI | 10.1086/669161 |
| OpenAlex | W2149707105 |
| Language | EN |
| Citations received | 36 |
| References cited | 32 |
This paper proposes a new mechanism by which country size and international trade affect macroeconomic volatility. We study a model with heterogeneous firms that are subject to idiosyncratic firm-specific shocks, calibrated to data for the 50 largest economies in the world. When the firm size distribution follows a power law with an exponent close to minus one, idiosyncratic shocks to large firms have an impact on aggregate volatility. Smaller countries have fewer firms and, thus, higher volatility. Trade opening makes the large firms more important, thus raising macroeconomic volatility. Trade can increase aggregate volatility by 15–20 percent in some small open economies
Econometrics · Economics · International economics · Monetary economics · Monetary policy · Small open economy · Volatility (finance · Complex Systems and Time Series Analysis · Economic theories and models · Global trade and economics
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Volatility and Development
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| Unique citing works | 36 |
|---|---|
| Citations per year | 3,27 |
| Citation span | 2015 - 2026 (12) |
| Citation velocity | current |
| Highly cited | No |
| Citation types | Neutral: 36 |