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Direct and Network Effects of Idiosyncratic TFP Shocks

Kristina Barauskaite (Griskeviciene) and Anh D. M. Nguyen ()
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Anh D. M. Nguyen: Bank of Lithuania & Vilnius University

No 65, Bank of Lithuania Working Paper Series from Bank of Lithuania

Abstract: This study investigates the direct and intersectoral network effects of idiosyncratic TFP shocks on sectors’ growth in the context of US manufacturing industries. To deal with the potential endogeneity of TFP, we propose a novel set of instruments for contemporaneous regressors. These instruments are technology shocks identified via sign restriction from sectoral SVAR models. Using US input-output tables and industry-level data, we quantify direct and network-based effects of the shocks. Our results show that idiosyncratic technology shocks propagate mostly downstream the network. In addition, we capture strong contemporaneous direct effects of the shocks.

Keywords: Input-Output Linkages; Network; Instrumental Variables; Idiosyncratic TFP Shocks; Sectoral Growth; US Manufacturing Industry (search for similar items in EconPapers)
JEL-codes: C36 C67 D24 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac, nep-tid and nep-ure
Date: 2019-08-13
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