American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
How Important Are Sectoral Shocks?
American Economic Journal: Macroeconomics
vol. 9,
no. 4, October 2017
(pp. 254–80)
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.20160353Additional 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