Too Big to Aggregate
Corporate Control and Policy-Invariant Aggregation
Research question
Which features of corporate control must a macro state retain to preserve a declared policy response?
Abstract
National accounts locate economic activity, while corporate control links the decisions through which it responds to policy. I ask which control information must accompany a supplied national state to preserve a declared policy response. The rank of the response along omitted state directions gives the minimum local augmentation. Its singular values measure the first-order cost of a smaller augmentation, with curvature bounds for finite experiments. In euro-area manufacturing, ECB monetary responses vary with lagged corporate-control indices. For a quarter-unit index radius and a one-standard-deviation monetary innovation, omitting both measured coordinates gives a fitted worst-case employment error of 0.1125 log percentage points across four horizons, with a simultaneous 95 percent interval of [0.0312,0.1939]. One coordinate lowers the point error to 0.0165. The value of the second coordinate increases when credit and investment enter the target. These estimates measure response heterogeneity across corporate states; identifying the effect of changing control requires separate variation.
In one sentence
Two economies can look identical in national aggregates yet react differently to monetary policy when corporate control is organized differently.