Flexibility and Frictions in Multisector Models

Jorge Miranda-Pinto and Eric Young

American Economic Journal: Macroeconomics, 2022, vol. 14, issue 3, 450-80

Abstract: We show that during the Great Recession, more-flexible sectors paid lower sectoral bond spreads. We rationalize this fact with a model with input-output linkages, heterogeneous elasticities, and binding working capital constraints in the use of intermediates. We show that the difference in flexibility between upstream and downstream sectors is key for determining the role of input-output linkages in amplifying or mitigating distortions. Calibrating the model to the US economy, we find that our sectoral elasticity estimates amplify distortions by a factor of 1.7 compared to the Cobb-Douglas case, and generate an input-output multiplier 1.2 times the homogeneous elasticity case.

JEL-codes: E23 E32 E43 E44 H56 L16 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/mac.20190097 (application/pdf)
https://www.aeaweb.org/doi/10.1257/mac.20190097.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/mac.20190097.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Flexibility and Frictions in Multisector Models (2019)
Working Paper: Flexibility and frictions in multisector models (2018)
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: https://EconPapers.repec.org/RePEc:aea:aejmac:v:14:y:2022:i:3:p:450-80

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/mac.20190097

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

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