Granular Origin of Comovement in Fluctuations

49 Pages Posted: 16 Sep 2021

See all articles by Anindya S. Chakrabati

Anindya S. Chakrabati

Indian Institute of Management (IIM), Ahmedabad

Shekhar Tomar

Indian School of Business

Date Written: September 13, 2021

Abstract

We study the origin of comovement in economic fluctuations across regions in India through a unique administrative dataset on plant-level sales. Regional sales exhibit a high level of comovement that can be traced to a small number of large plants located in different regions, indicating a granular nature of regional comovement. Quantitatively, the top 10 plants from each region explain almost two-thirds of the total variation in regional comovement. We test three channels for comovement, viz. through aggregate regional trade, large granular plants, or granular multi-plant firms located in different regions. We nd that inter-region sales of multi-plant firms is the most dominant factor behind regional comovement and subsumes both aggregate trade and plant-level effects.

Keywords: Granularity, comovement, multi-plant rms.

JEL Classification: E32, E23, O47.

Suggested Citation

Chakrabati, Anindya S. and Tomar, Shekhar, Granular Origin of Comovement in Fluctuations (September 13, 2021). Available at SSRN: https://ssrn.com/abstract=3922938 or http://dx.doi.org/10.2139/ssrn.3922938

Anindya S. Chakrabati (Contact Author)

Indian Institute of Management (IIM), Ahmedabad ( email )

Vastrapur
Ahmedabad, Gujarat 380 015
India

Shekhar Tomar

Indian School of Business ( email )

Hyderabad, Gachibowli 500 019
India

HOME PAGE: http://shekhartomar.com

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