This paper argues that in the presence of intersectoral input-output linkages, microeconomic idiosyncratic shocks may lead to aggregate fluctuations. In particular, it shows that, as the economy becomes more disaggregated, the rate at which aggregate volatility decays is determined by the...

This paper studies how firm failures and the resulting disruptions to supply chains can amplify negative shocks. We develop a non-competitive model where customized supplier-customer relations increase productivity, and the relationship-specific surplus generated between firms and their...