Estimating General Equilibrium Spillovers of Large-Scale Shocks

Kilian Huber

No 29908, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Large-scale shocks directly affect some firms and households and indirectly affect others through general equilibrium spillovers. In this paper, I describe how researchers can directly estimate spillovers using quasi-experimental or experimental variation. I then argue that spillover estimates suffer from distinct sources of mechanical bias that standard empirical tools cannot resolve. These biases are particularly relevant in finance and macroeconomics, where multiple spillover channels and nonlinear effects are common. I offer guidance on how to detect and overcome mechanical biases. An application and several examples highlight that the suggested methods are broadly relevant and can inform policy and multiplier calculations.

JEL-codes: C13 C2 D5 E0 E51 G0 G21 G30 L2 R11 R23 R51 (search for similar items in EconPapers)
Date: 2022-04
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-geo and nep-mac
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Published as Kilian Huber & Holger Mueller, 2023. "Estimating General Equilibrium Spillovers of Large-Scale Shocks," The Review of Financial Studies, vol 36(4), pages 1548-1584.

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Related works:
Working Paper: Estimating General Equilibrium Spillovers of Large-Scale Shocks (2021)
Working Paper: Estimating General Equilibrium Spillovers of Large-Scale Shocks (2021)
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