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Journal Articles Journal of Evolutionary Economics Year : 2019

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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hal-02557845 , version 1 (29-04-2020)

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Attribution - NonCommercial - NoDerivatives

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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. ⟨10.1007/s00191-018-0590-4⟩. ⟨hal-02557845⟩
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