TITLE:
Granularity: Macroeconomics and Beyond
AUTHORS:
Sergio Da Silva
KEYWORDS:
Granularity, Granular Residual, Granular Size, Power Laws
JOURNAL NAME:
Open Access Library Journal,
Vol.11 No.8,
August
15,
2024
ABSTRACT: Granularity, a macroeconomics concept, explains how small economic shocks can cause significant fluctuations in the broader economy. The granularity hypothesis posits that large firms’ shocks disproportionately impact the economy, countering the idea that these shocks are balanced out at the macro level by the law of large numbers. Granularity, indicating the presence of both few large and many small firms, implies that firm size distribution adheres to a power law, thereby linking granularity and power laws. Power law distributions are common across various scientific fields, yet the associated concept of granular size remains unexplored. We explain that computing the granular size opens up new research opportunities in a wide range of scientific areas where quantities follow a power law distribution.