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Do large firm dynamics drive the business cycle? We answer this question by developing a quantitative theory of aggregate fluctuations caused by firm-level disturbances alone. We show that a standard heterogeneous firm dynamics setup already contains in it a theory of the business cycle, without appealing to aggregate shocks. We offer an analytical characterization of the law of motion of the aggregate state in this class of models, the firm size distribution, and show that aggregate output and productivity dynamics display: (i ) persistence, (ii ) volatility, and (iii ) time-varying second moments. We explore the key role of moments of the firm size distribution, and, in particular, the role of large firm dynamics, in shaping aggregate fluctuations, theoretically, quantitatively, and in the data. (JEL D21, D22, D24, E32, L11)

We study markup cyclicality in a granular macroeconomic model with oligopolistic competition. We characterize the comovement of firm, sectoral, and economy-wide markups with sectoral and aggregate output following firm-level shocks. We then quantify the model's ability to reproduce salient features of the cyclical properties of markups in French administrative firmlevel data, from the bottom (firm) level to the aggregate level. Our model helps rationalize various, seemingly conflicting, measures of markup cyclicality in the French data.

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