Does the mere presence of big banks affect macroeconomic outcomes? In this paper, we develop a theory of granularity (Gabaix, 2011) for the banking sector, introducing Bertrand competition and heterogeneous banks charging variable markups. Using this framework, we show conditions under which...

Does the mere presence of big banks affect macroeconomic outcomes? Gabaix (2011) shows that idosyncratic shocks can have aggregate effects if the distribution of firm sizes in manufacturing follows a power law distribution. Our contribution is two-fold. First, we expand the theory of granularity...

Does the mere presence of big banks affect macroeconomic outcomes? In this paper, we develop a theory of granularity (Gabaix, 2011) for the banking sector, introducing Bertrand competition and heterogeneous banks charging variable markups. Using this framework, we show conditions under which...

Does the mere presence of big banks affect macroeconomic outcomes? In this paper, we develop a theory of granularity (Gabaix, 2011) for the banking sector, introducing Bertrand competition and heterogeneous banks charging variable markups. Using this framework, we show conditions under which...

Does the mere presence of big banks affect macroeconomic outcomes? In this paper, we develop a theory of granularity (Gabaix, 2011) for the banking sector, introducing Bertrand competition and heterogeneous banks charging variable markups. Using this framework, we show conditions under which...

This paper studies whether the raise in concentration experienced by the Spanish banking sector has lead to the increase of bank-specific credit supply shocks contribution to aggregate credit supply. We decompose aggregate credit volatility and find that (i) the Spanish banking sector is...

We integrate systemic financial instability in an empirical macroeconomic model for the euro area. We find that at times of widespread financial instability the macroeconomy functions fundamentally differently from tranquil times. We employ a richly specified Markov-Switching...