Aggregate fluctuations and the network structure of intersectoral trade
This paper analyzes the flow of intermediate inputs across sectors by adopting a network perspective on sectoral interactions. I apply these tools to show how fluctuations in aggregate economic activity can be obtained from independent shocks to individual sectors. First, I characterize the network structure of input trade in the U.S. On the demand side, a typical sector relies on a small number of key inputs and sectors are homogeneous in this respect. However, in their role as input-suppliers sectors do differ: many specialized input suppliers coexist alongside general purpose sectors functioning as hubs to the economy. I then develop a model of intersectoral linkages that can reproduce these connectivity features. In a standard multisector setup, I use this model to provide analytical expressions linking aggregate volatility to the network structure of input trade. I show that the presence of sectoral hubs - by coupling production decisions across sectors - leads to fluctuations in aggregates.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jovanovic, Boyan, 1986.
"Micro Shocks and Aggregate Risks,"
86-14, C.V. Starr Center for Applied Economics, New York University.
- Nirei, Makoto, 2006. "Threshold behavior and aggregate fluctuation," Journal of Economic Theory, Elsevier, vol. 127(1), pages 309-322, March.
- Horvath, Michael, 2000. "Sectoral shocks and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 69-106, February.
- Peter Bak & Kan Chen & Jose Scheinkman & Michael Woodford, 1992.
"Aggregate Fluctuations from Independent Sectoral Shocks: Self-Organized Criticality in a Model of Production and Inventory Dynamics,"
NBER Working Papers
4241, National Bureau of Economic Research, Inc.
- Bak, Per & Chen, Kan & Scheinkman, Jose & Woodford, Michael, 1993. "Aggregate fluctuations from independent sectoral shocks: self-organized criticality in a model of production and inventory dynamics," Ricerche Economiche, Elsevier, vol. 47(1), pages 3-30, March.
- Szyld, Daniel B, 1985. "Conditions for the Existence of a Balanced Growth Solution for the Leontief Dynamic Input-Output Model," Econometrica, Econometric Society, vol. 53(6), pages 1411-19, November.
- Gabaix, Xavier & Ioannides, Yannis M., 2004.
"The evolution of city size distributions,"
Handbook of Regional and Urban Economics,
in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 53, pages 2341-2378
- Xavier Gabaix & Yannis M. Ioannides, 2003. "The Evolution of City Size Distributions," Discussion Papers Series, Department of Economics, Tufts University 0310, Department of Economics, Tufts University.
- Dupor, Bill, 1999. "Aggregation and irrelevance in multi-sector models," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 391-409, April.
- Rauch, James E., 1999.
"Networks versus markets in international trade,"
Journal of International Economics,
Elsevier, vol. 48(1), pages 7-35, June.
- Scheinkman, Jose A & Woodford, Michael, 1994. "Self-Organized Criticality and Economic Fluctuations," American Economic Review, American Economic Association, vol. 84(2), pages 417-21, May.
- Cooper, Russell & Haltiwanger, John, 1990.
"Inventories and the Propagation of Sectoral Shocks,"
American Economic Review,
American Economic Association, vol. 80(1), pages 170-90, March.
- Russell Cooper & John C. Haltiwanger, 1987. "Inventories and the Propagation of Sectoral Shocks," NBER Working Papers 2425, National Bureau of Economic Research, Inc.
- Michael Horvath, 1998. "Cyclicality and Sectoral Linkages: Aggregate Fluctuations from Independent Sectoral Shocks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(4), pages 781-808, October.
- Xavier Gabaix, 2011.
"The Granular Origins of Aggregate Fluctuations,"
Econometric Society, vol. 79(3), pages 733-772, 05.
- Norrbin, Stefan C. & Schlagenhauf, Don E., 1990. "Sources of output fluctuations in the United States during the inter-war and post-war years," Journal of Economic Dynamics and Control, Elsevier, vol. 14(3-4), pages 523-551, October.
- Timothy G. Conley & Bill Dupor, 2003. "A Spatial Analysis of Sectoral Complementarity," Journal of Political Economy, University of Chicago Press, vol. 111(2), pages 311-352, April.
- Shea, John S, 2002. "Complementarities and Comovements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 412-33, May.
When requesting a correction, please mention this item's handle: RePEc:upf:upfgen:1206. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.