Firm Dynamics and the Origins of Aggregate Fluctuations

What drives aggregate fluctuations? In order to test recent theories on the importance of macroeconomic and firm-level shocks, I estimate a dynamic factor model with firm-level data. Each time series, the sales growth of a specific firm, is decomposed in an unobserved common macroeconomic component and in a residual that I interpret as an idiosyncratic firm-level component. The empirical results suggest that idiosyncratic shocks explain most of firm dynamics, but have no role in explaining U.S. GDP growth fluctuations