Economics at your fingertips  

Microeconomic Origins of Macroeconomic Tail Risks

Daron Acemoglu, Asuman Ozdaglar and Alireza Tahbaz-Salehi

American Economic Review, 2017, vol. 107, issue 1, 54-108

Abstract: Using a multisector general equilibrium model, we show that the interplay of idiosyncratic microeconomic shocks and sectoral heterogeneity results in systematic departures in the likelihood of large economic downturns relative to what is implied by the normal distribution. Such departures can emerge even though GDP fluctuations are approximately normally distributed away from the tails, highlighting the different nature of large economic downturns from regular business-cycle fluctuations. We further demonstrate the special role of input-output linkages in generating tail comovements, whereby large recessions involve not only significant GDP contractions, but also large simultaneous declines across a wide range of industries.

JEL-codes: D57 E16 E23 E32 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/aer.20151086
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (22) Track citations by RSS feed

Downloads: (external link) (application/pdf) ... fwN9egbOAmK8TKjtobii (application/zip) ... U2LnydoMUODpIRufcvyR (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Microeconomic Origins of Macroeconomic Tail Risks (2015) Downloads
Working Paper: Microeconomic Origins of Macroeconomic Tail Risks (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

Page updated 2018-09-05
Handle: RePEc:aea:aecrev:v:107:y:2017:i:1:p:54-108