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Global intersectoral production network and aggregate fluctuations

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  • Barauskaite, Kristina
  • Nguyen, Anh D.M.

Abstract

Sectoral shocks compound via intersectoral production networks into sizable aggregate effects. Current evidence of this mechanism has relied on country-specific data using classical estimation methods. We extend this literature to account for the cross-country industry links from the World Input-Output Database over 2000–2014 in a Bayesian methodological framework. Our results highlight the global production network's role in propagating sectoral shocks to aggregate fluctuations, which stems from the significant asymmetry regarding the importance of sectors in supplying to others in this network, both as direct suppliers and as indirect suppliers to chains of downstream sectors. Furthermore, we document an increase in the asymmetry of the global production network over time, with specific sectors, particularly from China, becoming prevalent world suppliers.

Suggested Citation

  • Barauskaite, Kristina & Nguyen, Anh D.M., 2021. "Global intersectoral production network and aggregate fluctuations," Economic Modelling, Elsevier, vol. 102(C).
  • Handle: RePEc:eee:ecmode:v:102:y:2021:i:c:s0264999321001668
    DOI: 10.1016/j.econmod.2021.105577
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    More about this item

    Keywords

    Intersectoral production linkages; Aggregate volatility; World Input-Output Database; Bayesian estimation;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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