The Impact of Credit Frictions on the Dynamics of International Trade. KU Leuven
Contemporaneous macroeonomic models invariantly rely on economywide shocks to explain aggregate fluctuations. The role of microeconomic shocks (e.g. to individual firms) has generally been overlooked. The relevance of small shocks for the macroeconomy was downplayed by Robert Lucas’ (1977) renowned essay on real business cycles. His argument is simple but powerful: if shocks that affect individual firms are idiosyncratic (i.e. random), these ...