Carvalho, Vasco; Gabaix, Xavier - In: American Economic Review 103 (2013) 5, pp. 1697-1727
We investigate the hypothesis that macroeconomic fluctuations are primitively the results of many microeconomic shocks. We define fundamental volatility as the volatility that would arise from an economy made entirely of idiosyncratic sectoral or firm-level shocks. Fundamental volatility...