Aggregate Fluctuations, Network Effects and Covid-19

Girish Bahal and Damian Lenzo

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We decompose the macroeconomic impact of Covid-19 in the US using three production network measures. First, we estimate the aggregate indirect effect of sectoral employment shocks, finding these “network spillovers†to account for ≈72% of the decline in real GDP over the second quarter of 2020. Second, we show that downstream propagation explains most of the aggregate effect of the sector-specific disruptions. Specifically, 77% of the GDP decline constitutes the effect of shocks to supplier sectors on downstream customers. Finally, higher-order feedback is mostly inconsequential in explaining the depth of the contraction: only 5% of the aggregate impact is attributed to second-, third- and higher- round effects of the initial shocks.

Keywords: production networks; Hulten’s theorem; disaggregated macroeconomic models; Covid-19 (search for similar items in EconPapers)
JEL-codes: D24 D5 D57 E23 E24 E32 O41 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2022-09
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2022-59

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