Idiosyncratic shocks and aggregate fluctuations in an emerging market

Inflation Expectations and the Supply Chain

“…This is in line with the idea that firms observe the latest available real GDP growth number. Replacing the lag of real GDP growth with the monthly indicator of economic activity published by the Central Bank of Chile does not alter the results (for more information about this indicator see https: //www.bcentral.cl/en/web/banco-central/area/statistics/imacec).19 The literature suggests that production networks are characterized by large firms with a lot of connections(Bernanke, 2007;Alfaro-Urena et al, 2018;Cardoza et al, 2020), including in Chile(Grigoli, Luttini and Sandri, 2021). In presence of suppliers that sell to many firms, time fixed effects would absorb the variation we are interested in.…”