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

  • 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
Date of revision:
Handle: RePEc:bar:bedcje:2012278
Contact details of provider: Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques. Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona. Spain.
Web page: http://www.ere.ub.es

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