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  4. October 2017
  5. How Important Are Sectoral Shocks?

How Important Are Sectoral Shocks?

  • Enghin Atalay
American Economic Journal: Macroeconomics
vol. 9, no. 4, October 2017
(pp. 254-80)
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Abstract

I quantify the contribution of sectoral shocks to business cycle fluctuations in aggregate output. I develop and estimate a multi-industry general equilibrium model in which each industry employs the material and capital goods produced by other sectors. Using data on US industries' input prices and input choices, I find that the goods produced by different industries are complements to one another as inputs in downstream industries' production functions. These complementarities indicate that industry-specific shocks are substantially more important than previously thought, accounting for at least half of aggregate volatility.

Citation

Atalay, Enghin. 2017. "How Important Are Sectoral Shocks?" American Economic Journal: Macroeconomics, 9 (4): 254-80. DOI: 10.1257/mac.20160353

Additional Materials

JEL Classification

  • D12 Consumer Economics: Empirical Analysis
  • D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • E23 Macroeconomics: Production
  • E32 Business Fluctuations; Cycles
  • L14 Transactional Relationships; Contracts and Reputation; Networks
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