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How Do Aggregate Fluctuations Depend on the Network Structure of the Economy?

Author Info

Listed author(s):
  • Lorenzo Burlon

    (Universitat de Barcelona)

Abstract

In this paper we analyze the aggregate volatility of a stylized economy where agents are networked. If strategic relations connect agents,actions, idiosyncratic shocks can generate nontrivial aggregate fluctuations. We show that the aggregate volatility depends on the network structure of the economy in two ways. On the one hand, the more connected the economy, the lower the aggregate volatility. On the other hand, the more concentrated the network, the higher the aggregate volatility. We provide an application of our theoretical predictions using US data on intersectoral linkages and firms diversification patterns.

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File URL: http://www.ere.ub.es/dtreball/E12278.rdf/at_download/file
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Paper provided by Universitat de Barcelona. Espai de Recerca en Economia in its series Working Papers in Economics with number 278.

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Length: 0 pages
Date of creation: 2012
Handle: RePEc:bar:bedcje:2012278
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Espai de Recerca en Economia, Facultat de Ciències Econòmiques. Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona. Spain.

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Keywords:

Find related papers by JEL classification:

  • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
  • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis

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  1. Vasco Carvalho, 2007. "Aggregate fluctuations and the network structure of intersectoral trade," Economics Working Papers 1206, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2010.
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Cited by:

  1. Daron Acemoglu & Asuman Ozdaglar & Alireza Tahbaz-Salehi, 2017. "Microeconomic Origins of Macroeconomic Tail Risks," American Economic Review, American Economic Association, vol. 107(1), pages 54-108, January.
  2. Charles D. Brummitt & Kenan Huremovic & Paolo Pin & Matthew H. Bonds & Fernando Vega-Redondo, 2017. "Contagious disruptions and complexity traps in economic development," Papers 1707.05914, arXiv.org.

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