Aggregate fluctuations and the network structure of intersectoral trade
Vasco Carvalho
Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Abstract:
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.
Keywords: Aggregation; Business Cycles; Comovement; Input-Output; Multisector Growth Models; Networks; Technological Diversification. (search for similar items in EconPapers)
Date: 2007-11, Revised 2010-10
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Citations: View citations in EconPapers (109)
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Working Paper: Aggregate Fluctuations and the Network Structure of Intersectoral Trade (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1206
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