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Evidence on Macroeconomic Complementarities

  • Cooper, Russell
  • Haltiwanger, John

This paper provides empirical evidence on macroeconomic complementarities, a restriction on the nature of interaction between individuals in a multiagent setting. These models imply that activities across agents will be positively correlated, that discrete decisions will be synchronized, and that disturbances will be magnified and propagated. The paper shows that these implications are consistent with aggregate observations as well as some microeconomic evidence. Further, looking at certain historical episodes, such as the National Industrial Recovery Act, as well as seasonal fluctuations provides additional support for models with macroeconomic complementarities. Copyright 1996 by MIT Press.

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Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 78 (1996)
Issue (Month): 1 (February)
Pages: 78-93

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Handle: RePEc:tpr:restat:v:78:y:1996:i:1:p:78-93
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  1. Russell Cooper & John C. Haltiwanger, 1987. "Inventories and the Propagation of Sectoral Shocks," NBER Working Papers 2425, National Bureau of Economic Research, Inc.
  2. Giuseppe Bertola & Ricardo J. Caballero, 1990. "Kinked Adjustment Costs and Aggregate Dynamics," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 237-296 National Bureau of Economic Research, Inc.
  3. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1989. "Increasing Returns, Durables and Economic Fluctuations," NBER Working Papers 3014, National Bureau of Economic Research, Inc.
  4. Caballero, Ricardo J, 1993. "Durable Goods: An Explanation for Their Slow Adjustment," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 351-84, April.
  5. Daniel S. Hamermesh, 1988. "Labor Demand and the Structure of Adjustment Costs," NBER Working Papers 2572, National Bureau of Economic Research, Inc.
  6. Satyajit Chatterjee & Russell W. Cooper & B. Ravikumar, 1993. "Strategic complementarity in business formation: aggregate fluctuations and sunspot equilibria," Working Papers 93-9, Federal Reserve Bank of Philadelphia.
  7. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
  8. Durlauf, Steven N, 1991. "Multiple Equilibria and Persistence in Aggregate Fluctuations," American Economic Review, American Economic Association, vol. 81(2), pages 70-74, May.
  9. Timothy F. Bresnahan & Valerie A. Ramey, 1992. "Output Fluctuations at the Plant Level," NBER Working Papers 4105, National Bureau of Economic Research, Inc.
  10. Janice C. Eberly, . "Adjustment of Consumers' Durables Stocks: Evidence from Automobile Purchases," Rodney L. White Center for Financial Research Working Papers 22-91, Wharton School Rodney L. White Center for Financial Research.
  11. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1990. "Labor Hoarding and the Business Cycle," NBER Working Papers 3556, National Bureau of Economic Research, Inc.
  12. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  13. Jeffrey A. Miron & Stephen P. Zeldes, . "Seasonality, Cost Shocks and the Production Smoothing Model of Inventories," Rodney L. White Center for Financial Research Working Papers 01-87, Wharton School Rodney L. White Center for Financial Research.
  14. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers 268, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Satyajit Chatterjee & Russell Cooper, 1993. "Entry and Exit, Product Variety and the Business Cycle," NBER Working Papers 4562, National Bureau of Economic Research, Inc.
  16. John Bryant, 1983. "A Simple Rational Expectations Keynes-type Model," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 525-528.
  17. J. Joseph Beaulieu & Jeffrey A. Miron, 1990. "The Seasonal Cycle in U.S. Manufacturing," NBER Working Papers 3450, National Bureau of Economic Research, Inc.
  18. Philippe Weil, 1989. "Increasing Returns and Animal Spirits," Sciences Po publications info:hdl:2441/8681, Sciences Po.
  19. Lawrence J. Christiano & Martin Eichenbaum, 1990. "Current real business cycle theories and aggregate labor market fluctuations," Discussion Paper / Institute for Empirical Macroeconomics 24, Federal Reserve Bank of Minneapolis.
  20. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
  21. Oliver Hart, 1982. "A Model of Imperfect Competition with Keynesian Features," The Quarterly Journal of Economics, Oxford University Press, vol. 97(1), pages 109-138.
  22. Steven J. Davis & John Haltiwanger, 1990. "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 123-186 National Bureau of Economic Research, Inc.
  23. Vives, Xavier, 1990. "Nash equilibrium with strategic complementarities," Journal of Mathematical Economics, Elsevier, vol. 19(3), pages 305-321.
  24. Russell Cooper & Andrew John, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, Oxford University Press, vol. 103(3), pages 441-463.
  25. Peter Howitt & R. Preston McAfee, 1988. "Stability of Equilibria with Externalities," The Quarterly Journal of Economics, Oxford University Press, vol. 103(2), pages 261-277.
  26. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
  27. Satyajit Chatterjee & B. Ravikumar, 1991. "A neoclassical model of seasonal fluctuations," Working Papers 91-23, Federal Reserve Bank of Philadelphia.
  28. Howitt, Peter, 1985. "Transaction Costs in the Theory of Unemployment," American Economic Review, American Economic Association, vol. 75(1), pages 88-100, March.
  29. Philippe Weil, 1989. "Increasing Returns and Animal Spirits," Post-Print hal-01009596, HAL.
  30. Shleifer, Andrei, 1986. "Implementation Cycles," Scholarly Articles 3451303, Harvard University Department of Economics.
  31. repec:spo:wpecon:info:hdl:2441/8681 is not listed on IDEAS
  32. Weitzman, Martin L, 1982. "Increasing Returns and the Foundations of Unemployment Theory," Economic Journal, Royal Economic Society, vol. 92(368), pages 787-804, December.
  33. John Shea, 1993. "Do Supply Curves Slope Up?," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 1-32.
  34. Nobuhiro Kiyotaki, 1988. "Multiple Expectational Equilibria Under Monopolistic Competition," The Quarterly Journal of Economics, Oxford University Press, vol. 103(4), pages 695-713.
  35. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
  36. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
  37. repec:oup:restud:v:60:y:1993:i:4:p:795-811 is not listed on IDEAS
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