Real Sectoral Spillovers: A Dynamic Factor Analysis of the Great Recession

Nan Li and Vance Martin

No 2018/100, IMF Working Papers from International Monetary Fund

Abstract: This paper studies changes in the transmission of common versus sectoral idiosyncratic shocks across different U.S. nonfarm business sectors during the Great Recession, and evaluates the cross-sectoral spillovers. Shocks are identified by dynamic factor methods. We find that the Great Recession is largely a time of heightened impact of common shocks— which accounts for 3/4 of aggregate volatility—and large spillovers of negative financerelated shocks. Moreover, in contrast with the earlier literature that failed to find a significant role of sectoral shocks (propagated through the input-output linkages across sectors) in driving variability in aggregate industry output, this study allows spillovers of shocks to operate through other mechanisms intertemporally. We find that prior to the recession the majority of aggregate fluctuations is explained by sector-specific shocks.

Keywords: WP; aggregate output; factor demand; Intersectoral Linkages; Dynamic Factor Models; Spillovers; Real Business Cycles; Input-output Structure; GR period; hybrid model; transmission mechanism; time series; period of the Great Recession; contribution estimate; recession period; FSW model; sector share distribution; share contribution; Global financial crisis of 2008-2009; Production growth; Factor models; Vector autoregression; Manufacturing (search for similar items in EconPapers)
Pages: 52
Date: 2018-05-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=45866 (application/pdf)

Related works:
Journal Article: Real sectoral spillovers: A dynamic factor analysis of the great recession (2019)
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:imf:imfwpa:2018/100

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().