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Direct and Network Effects of Idiosyncratic TFP Shocks

Author

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  • Kristina Barauskaite

    (Bank of Lithuania & ISM University of Management and Economics)

  • Anh D. M. Nguyen

    (Bank of Lithuania & Vilnius University)

Abstract

This study investigates the direct and intersectoral network effects of idiosyncratic TFP shocks on sectors’ growth in the context of US manufacturing industries. To deal with the potential endogeneity of TFP, we propose a novel set of instruments for contemporaneous regressors. These instruments are technology shocks identified via sign restriction from sectoral SVAR models. Using US input-output tables and industry-level data, we quantify direct and network-based effects of the shocks. Our results show that idiosyncratic technology shocks propagate mostly downstream the network. In addition, we capture strong contemporaneous direct effects of the shocks.

Suggested Citation

  • Kristina Barauskaite & Anh D. M. Nguyen, 2019. "Direct and Network Effects of Idiosyncratic TFP Shocks," Bank of Lithuania Working Paper Series 65, Bank of Lithuania.
    • Handle: RePEc:lie:wpaper:65
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    Cited by:

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    2. Kristina Barauskaite & Anh D. M. Nguyen, 2022. "Intersectoral network‐based channel of aggregate TFP shocks," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 3897-3910, October.
    3. Lin, Boqiang & Wang, Zhijun, 2024. "Economic effects of shocks in the coal industry: An analysis based on DSGE model," Resources Policy, Elsevier, vol. 98(C).
    4. Xiao, Anran & Xu, Zeshui & Wu, Tong & Qin, Yong & Skare, Marinko, 2024. "Technological progress and economic dynamics: Unveiling the long memory of total factor productivity," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 326-343.
    5. Yonghong Ma & Huili Ni & Xiaomeng Yang & Lingkai Kong & Chunmei Liu, 2023. "Government subsidies and total factor productivity of enterprises: a life cycle perspective," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(1), pages 153-188, April.
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    7. Barauskaite, Kristina & Nguyen, Anh D.M., 2021. "Global intersectoral production network and aggregate fluctuations," Economic Modelling, Elsevier, vol. 102(C).

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    Keywords

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    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • 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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