Aggregate Fluctuations and the Network Structure of Intersectoral Trade
AbstractThis paper analyzes the flow of intermediate inputs across sectors by adopting a network perspective on sectoral interactions. I apply these tools to show how fluctuations in aggregate economic activity can be obtained from independent shocks to individual sectors. First, I characterize the network structure of input trade in the U.S. On the demand side, a typical sector relies on a small number of key inputs and sectors are homogeneous in this respect. However, in their role as input-suppliers sectors do differ: many specialized input suppliers coexist alongside general purpose sectors functioning as hubs to the economy. I then develop a model of intersectoral linkages that can reproduce these connectivity features. In a standard multisector setup, I use this model to provide analytical expressions linking aggregate volatility to the network structure of input trade. I show that the presence of sectoral hubs - by coupling production decisions across sectors - leads to fluctuations in aggregates.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2008 Meeting Papers with number 1062.
Date of creation: 2008
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Other versions of this item:
- Vasco Carvalho, 2007. "Aggregate fluctuations and the network structure of intersectoral trade," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 1206, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2010.
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