We introduce firm heterogeneity into the standard monopolistically competitive real business cycle (RBC) model. The fundamental equilibrium path is derived and the time-series properties of aggregate GDP are studied analytically. Although firms' productivities are subject to temporary shocks,...

We detect a new stylized fact that is common to the dynamics of all macroeconomic series, including financial aggregates. Their Auto-Correlation Functions (ACFs) share a common four-parameter functional form that arises from the dynamics of a general equilibrium model with heterogeneous firms....