Production Networks, Time to Build and Endogenous Oscillations

Matteo Bizzarri (), Marco Pangallo () and Francisco Queirós ()
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Matteo Bizzarri: University of Naples Federico II and CSEF, https://csef.it/people/matteo-bizzarri/
Marco Pangallo: CENTAI Institute
Francisco Queirós: ISEG - Lisbon School of Economics and Management

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We study how sector-specific shocks propagate in a production economy with input-output linkages and heterogeneous time to build. We show that, depending on the sector and network characteristics, one-time idiosyncratic shocks can induce a non-monotonic response of aggregate output as it converges back to steady state– a phenomenon we term ’endogenous oscillations’ – and get amplified over time. We study the conditions on the network structure that generate this behavior. We introduce a measure to quantify the magnitude of such endogenous oscillations generated by a single small productivity shock. We quantify the model on US input-output data, showing that for some sectors a single shock can generate aggregate fluctuations. In particular, the magnitude of oscillations is twice as large as it would be if convergence to the steady state were always monotonic.

Keywords: Endogenous Oscillations; Business Cycles; Production Networks (search for similar items in EconPapers)
JEL-codes: C67 D57 D85 E23 E32 (search for similar items in EconPapers)
Date: 2025-10-16
New Economics Papers: this item is included in nep-dge and nep-net
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