Download or read book Sectoral Shocks and Aggregate Fluctuations written by Michael T. K. Horvath and published by . This book was released on 1998 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a multisector dynamic general equilibrium model of business cycles with a distinctive feature: aggregate fluctuations are driven by independent sectoral shocks. The model hypothesizes that trade among sectors provides a strong synchronization mechanism for these shocks due to the limited, but locally intense, interaction that is characteristic of such input trade flows. Limited interaction, characterized by a sparse intermediate input-use matrix, reduces substitution possibilities among intermediate inputs which strengthens co-movement in sectoral value-added and leads to a postponement of the law of large numbers in the variance of aggregate value-added. The chief virtue of this model is that reliance on implausible aggregate shocks is not necessary to capture the qualitative features of macroeconomic fluctuations. Building on Horvath (1997), which establishes the theoretical foundation for the relevance of limited interaction in the context of a stylized multisector model, this paper specifies a more general multisector model calibrated to the U.S. 2-digit Standard Industrial Code economy. Simulations prove the model is able to match empirical reality as closely as standard one-sector business cycle models without relying on aggregate shocks.

Download or read book Idiosyncratic Shocks and Aggregate Fluctuations in an Emerging Market written by Mr. Francesco Grigoli and published by International Monetary Fund. This book was released on 2021-12-10 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides the first assessment of the contribution of idiosyncratic shocks to aggregate fluctuations in an emerging market using confidential data on the universe of Chilean firms. We find that idiosyncratic shocks account for more than 40 percent of the volatility of aggregate sales. Although quite large, this contribution is smaller than documented in previous studies based on advanced economies, despite a higher degree of market concentration in Chile.We show that this finding is explained by larger firms being less volatile and by weaker propagation effects across Chilean firms.

Download or read book Aggregate Fluctuations from Independent Sectoral Shocks written by Per Bak and published by . This book was released on 1992 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper illustrates how fluctuations in aggregate economic activity can result from many small, independent shocks to individual sectors. The effects of the small independent shocks fail to cancel in the aggregate due to the presence of two non-standard assumptions: local interaction between productive units (linked by supply relationships), and non-convex technology. We also argue that neither feature on its own would suffice. In the case of a simple model, we explicitly calculate the distribution of aggregate activity in the limit of an infinite number of independently disturbed sectors.

Download or read book Cyclicality and Sectoral Linkages written by Michael T. K. Horvath and published by . This book was released on 1997 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The traditional argument against the relevance of sector-specific shocks for the aggregate phenomenon of business cycles invokes the law of large numbers: positive shocks in some sectors are offset by negative shocks in other sectors. This paper hypothesizes that the law of large numbers may be postponed if the nature of sectoral interactions provides a synchronizing force, heightening co-movement in sectoral production. The analysis is performed within the context of a multi-sector model similar in spirit to that of Long and Plosser (1983). The paper explores the role limited interaction between sectors plays in determining the response of the aggregate economy from sector-specific disturbances. A feature of limited interaction that the paper stresses is that it implies few possibilities of substitution among intermediate inputs and that this increases sectoral co-movement and hence aggregate volatility. A low degree of sectoral interaction is characterized by a sparse input-use matrix. The rate at which the law of large numbers applies for increasing levels of disaggregation is shown to be controlled by the rate of increase in the number of predominantly full rows in the input-use matrix rather than by the rate of increase in the total number of sectors.Investigations of actual input-use matrices from the U.S. economy reveal that the number of full rows increases much slower than the total number of rows upon disaggregation, and when these input-use matrices are used to parameterize the model, aggregate volatility from sectoral shocks declines at a slower rate than that implied by the law of large numbers.

Download or read book Technology Shocks and Aggregate Fluctuations written by Mr.Pau Rabanal and published by International Monetary Fund. This book was released on 2004-12-01 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: Our answer: Not so well. We reached that conclusion after reviewing recent research on the role of technology as a source of economic fluctuations. The bulk of the evidence suggests a limited role for aggregate technology shocks, pointing instead to demand factors as the main force behind the strong positive comovement between output and labor input measures.

Download or read book Real Sectoral Spillovers A Dynamic Factor Analysis of the Great Recession written by MissNan Li and published by International Monetary Fund. This book was released on 2018-05-09 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies changes in the transmission of common versus sectoral idiosyncratic shocks across different U.S. nonfarm business sectors during the Great Recession, and evaluates the cross-sectoral spillovers. Shocks are identified by dynamic factor methods. We find that the Great Recession is largely a time of heightened impact of common shocks— which accounts for 3/4 of aggregate volatility—and large spillovers of negative financerelated shocks. Moreover, in contrast with the earlier literature that failed to find a significant role of sectoral shocks (propagated through the input-output linkages across sectors) in driving variability in aggregate industry output, this study allows spillovers of shocks to operate through other mechanisms intertemporally. We find that prior to the recession the majority of aggregate fluctuations is explained by sector-specific shocks.

Download or read book Do Sector specified Shocks Explain Aggregate Fluctuations written by and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Local Market Interactions and Aggregate Fluctuations written by Randal John Verbrugge and published by . This book was released on 1995 with total page 334 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Sectoral and Aggregate Shocks to Industrial Output in Germany Japan and Canada written by Reva Krieger and published by . This book was released on 1989 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Price Rigidities and the Granular Origins of Aggregate Fluctuations written by Ernesto Pasten and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the aggregate implications of sectoral shocks in a multi-sector New Keynesian model featuring sectoral heterogeneity in price stickiness, sector size, and input-output linkages. We calibrate a 341 sector version of the model to the United States. Both theoretically and empirically, sectoral heterogeneity in price rigidity (i) generates sizable GDP volatility from sectoral shocks, (ii) amplifies both the "granular" and the "network" effects, (iii) alters the identity and relative contributions of the most important sectors for aggregate fluctuations, (iv) can change the sign of fluctuations, (v) invalidates the Hulten Theorem, and (vi) generates a frictional origin of aggregate fluctuations.

Download or read book Uncertainty and Unemployment written by Sangyup Choi and published by International Monetary Fund. This book was released on 2015-02-23 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the role of uncertainty shocks in explaining unemployment dynamics, separating out the role of aggregate and sectoral channels. Using S&P500 data from the first quarter of 1957 to third quarter of 2014, we construct separate indices to measure aggregate and sectoral uncertainty and compare their effects on the unemployment rate in a standard macroeconomic vector autoregressive (VAR) model. We find that aggregate uncertainty leads to an immediate increase in unemployment, with the impact dissipating within a year. In contrast, sectoral uncertainty has a long-lived impact on unemployment, with the peak impact occurring after two years. The results are consistent with a view that the impact of aggregate uncertainty occurs through a “wait-and-see” mechanism while increased sectoral uncertainty raises unemployment by requiring greater reallocation across sectors.

Download or read book Sectoral Shocks and Spillovers An Application to COVID 19 written by Mr. Sonali Das and published by International Monetary Fund. This book was released on 2021-07-30 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the role of sectoral spillovers in propagating sectoral shocks in the broader economy, both in the past and during the COVID-19 pandemic. In particular, we study how shocks that occur within a sector itself and spillovers from shocks to other sectors affect sectoral activity, for a large sample of countries from 1995 to 2014. We find that both supply and demand shocks—measured as changes in, respectively, productivity and government purchases at the sector level—have large spillover effects on sector-level gross value added and on a sector’s share of the economy. We then use these historical estimates, together with the network structure of global production, to quantify the spillovers from the economic shock associated with the pandemic. We find spillover effects to be sizeable, making up a significant fraction of the overall decline in activity in 2020.Our results have implications for the design of policies with a sectoral dimension.

Download or read book Price Rigidity and the Origins of Aggregate Fluctuations written by Ernesto Pasten and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We document a novel role of heterogeneity in price rigidity: It strongly amplifies the capacity of idiosyncratic shocks to drive aggregate fluctuations. Heterogeneity in price rigidity also completely changes the identity of sectors from which fluctuations originate. We show these results both theoretically and empirically through the lens of a multi-sector model featuring heterogeneous GDP shares, input-output linkages, and idiosyncratic productivity shocks. Quantitatively, we calibrate our model to 341 sectors and find sectoral productivity shocks can give rise to aggregate fluctuations that are half as large as those arising from an aggregate productivity shock. Heterogeneous price rigidity amplifies the aggregate fluctuations by a factor of more than 2 relative to a flexible-price or homogeneous sticky price economy. Hence, idiosyncratic shocks and heterogeneous price rigidity can account for large parts of aggregate uctuations and there is hope we will not "forever remain ignorant of the fundamental causes of economic fluctuations" (Cochrane (1994)).

Download or read book Business Cycles Indicators and Forecasting written by James H. Stock and published by University of Chicago Press. This book was released on 2008-04-15 with total page 350 pages. Available in PDF, EPUB and Kindle. Book excerpt: The inability of forecasters to predict accurately the 1990-1991 recession emphasizes the need for better ways for charting the course of the economy. In this volume, leading economists examine forecasting techniques developed over the past ten years, compare their performance to traditional econometric models, and discuss new methods for forecasting and time series analysis.

Download or read book Why Can Sectoral Shocks Lead to Sizable Macroeconomic Fluctuations Assessing Alternative Theories by Means of Stochastic Simulation with a General Equilibrium Model written by Roberto Roson and published by . This book was released on 2015 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Relatively small sectoral productivity shocks could lead to sizable macroeconomic variability. Whereas most contributions in the literature analyze the issue of aggregate sensitivity using simple general equilibrium models, a novel approach is proposed in this paper, based on stochastic simulations with a global CGE model. We estimate the statistical distribution of the real GDP in 109 countries, assuming that the productivities of the industrial value added composites are identically and independently distributed random variables. We subsequently undertake a series of regressions in which the standard error of the GDP is expressed as a function of variables measuring the "granularity" of the economy, the distribution of input-output trade flows, and the degree of foreign trade openness.We find that the variability of the GDP, induced by sectoral shocks, is basically determined by the degree of industrial concentration as counted by the Herfindhal index of industrial value added. The degree of centrality in inter-industrial connectivity, measured by the standard deviation of second order degrees, is mildly significant, but it is also correlated with the industrial concentration index. After controlling for the correlation effect, we find that connectivity turns out to be statistically significant, although less so than granularity.

Download or read book Aggregate Versus Sectoral Shocks written by Saurabh Sharma and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The comovement among different sectors of the Indian economy is found to be low which suggests an important role for sector-level disturbances vis-à-vis aggregate shocks in explaining economic fluctuations. Accordingly, the paper adopts a multisectoral framework that accounts for aggregate as well as sectoral shocks to offer a new take on the Indian economy. Using a dynamic factor model to decompose GDP, the paper finds that around 48 per cent of the variation in GDP in the long-run is explained by sectoral shocks, with their contribution increasing to 98 per cent in the short-run. Thus, short-run economic fluctuations or the business cycle is almost entirely driven by sectoral shocks. Among sectoral shocks, those associated with public administration followed by manufacturing and agriculture are found to contribute most to the GDP movement in the short run. A historical decomposition analysis shows that sectoral shocks emanating in the manufacturing sector have been consistently unfavourable, highlighting that the sector has been unable to keep pace with the rest of the economy. Further, it is found that most of the sectoral shocks move GDP and inflation in the opposite direction thereby generating an impact similar to a supply shock.

Download or read book Sectoral Shocks and Business Cycles written by Guglielmo Maria Caporale and published by . This book was released on 1994 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: