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How Do Aggregate Fluctuations Depend on the Network Structure of the Economy?

Lorenzo Burlon ()

No 278, Working Papers in Economics from Universitat de Barcelona. Espai de Recerca en Economia

Abstract: In this paper we analyze the aggregate volatility of a stylized economy where agents are networked. If strategic relations connect agents,actions, idiosyncratic shocks can generate nontrivial aggregate fluctuations. We show that the aggregate volatility depends on the network structure of the economy in two ways. On the one hand, the more connected the economy, the lower the aggregate volatility. On the other hand, the more concentrated the network, the higher the aggregate volatility. We provide an application of our theoretical predictions using US data on intersectoral linkages and firms diversification patterns.

JEL-codes: C67 E32 D57 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hme and nep-net
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:bar:bedcje:2012278

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