We propose a new way to construct instruments in a broad class of economic environments: “granular instrumental variables” (GIVs). In the economies we study, a few large firms, industries or countries account for an important share of economic activity. As the idiosyncratic shocks from these...

We propose a new way to construct instruments in a broad class of economic environments: "granular instrumental variables" (GIVs). In the economies we study, a few large firms, in- dustries or countries account for an important share of economic activity. As the idiosyncratic shocks from these...

We propose a new way to construct instruments in a broad class of economic environments. In the economies we study, a few large firms, industries or countries account for an important share of economic activity. As the idiosyncratic shocks from these large players affect aggregate outcomes, they...

In this paper, we first introduce investment-specific technology (IST) shocks into an otherwise standard international real business cycle model and show that a thoughtful calibration of them along the lines of Raffo (2009) successfully addresses several of the existing puzzles in the...