We present new empirical evidence on the role of granularity in the current account (CA), using a unique and comprehensive firm-level dataset for Switzerland. We show that idiosyncratic shocks to large firms account for almost two thirds of the fluctuations in the headline CA and are the primary source of CA volatility. The granular effect is present across goods, services, and income components and persists over both short- and medium-term horizons. In addition to their direct impact, idiosyncratic shocks propagate through inter-firm linkages via input–output relationships and cross-product connections associated with multinational enterprise activity. Our findings complement standard macroeconomic models by providing a micro-founded perspective and demonstrating the importance of granularity in explaining fluctuations in external balances.
Koomen et al. (Thu,) studied this question.