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

Listed author(s):
  • Lorenzo Burlon

    (Universitat de Barcelona)

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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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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  1. Yann Bramoullé & Rachel Kranton & Martin D'Amours, 2014. "Strategic Interaction and Networks," Post-Print halshs-00978692, HAL.
  2. Daron Acemoglu & Vasco M. Carvalho & Asuman E. Ozdaglar & Alireza Tahbaz-Salehi, 2012. "The Network Origins of Aggregate Fluctuations," Levine's Working Paper Archive 786969000000000359, David K. Levine.
  3. Vasco M. Carvalho & Xavier Gabaix, 2010. "The Great Diversification and its Undoing," NBER Working Papers 16424, National Bureau of Economic Research, Inc.
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  14. Xavier Gabaix, 2005. "The Granular Origins of Aggregate Fluctuations," 2005 Meeting Papers 470, Society for Economic Dynamics.
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  16. Vasco M Carvalho, 2008. "Aggregate Fluctuations and the Network Structure of Intersectoral Trade," 2008 Meeting Papers 1062, Society for Economic Dynamics.
  17. Shea, John S, 2002. "Complementarities and Comovements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 412-433, May.
  18. Banerjee, Abhijit & Chandrasekhar, Arun G & Duflo, Esther & Jackson, Matthew O., 2012. "The Diffusion of Microfinance," CEPR Discussion Papers 8770, C.E.P.R. Discussion Papers.
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