scholarly journals How Important Are Sectoral Shocks?

2017 ◽  
Vol 9 (4) ◽  
pp. 254-280 ◽  
Author(s):  
Enghin Atalay
Keyword(s):  
Business Cycle ◽  
General Equilibrium ◽  
Equilibrium Model ◽  
General Equilibrium Model ◽  
Production Functions ◽  
Aggregate Output ◽  
Business Cycle Fluctuations ◽  
Sectoral Shocks ◽  
Using Data ◽  
Input Prices

I quantify the contribution of sectoral shocks to business cycle fluctuations in aggregate output. I develop and estimate a multi-industry general equilibrium model in which each industry employs the material and capital goods produced by other sectors. Using data on US industries' input prices and input choices, I find that the goods produced by different industries are complements to one another as inputs in downstream industries' production functions. These complementarities indicate that industry-specific shocks are substantially more important than previously thought, accounting for at least half of aggregate volatility. (JEL D12, D24, E23, E32, L14)

Risk Shocks

2014 ◽  
Vol 104 (1) ◽  
pp. 27-65 ◽  
Author(s):  
Lawrence J. Christiano ◽  
Roberto Motto ◽  
Massimo Rostagno
Keyword(s):  
Business Cycle ◽  
General Equilibrium ◽  
Equilibrium Model ◽  
Dynamic General Equilibrium ◽  
General Equilibrium Model ◽  
Cross Sectional ◽  
Dynamic General Equilibrium Model ◽  
The Business Cycle ◽  
Idiosyncratic Uncertainty ◽  
Over Time

We augment a standard monetary dynamic general equilibrium model to include a Bernanke-Gertler-Gilchrist financial accelerator mechanism. We fit the model to US data, allowing the volatility of cross-sectional idiosyncratic uncertainty to fluctuate over time. We refer to this measure of volatility as risk. We find that fluctuations in risk are the most important shock driving the business cycle. (JEL D81, D82, E32, E44, L26)

scholarly journals IDENTIFYING NEWS SHOCKS WITH FORECAST DATA

2019 ◽  
pp. 1-30 ◽  
Author(s):  
Yasuo Hirose ◽  
Takushi Kurozumi
Keyword(s):  
Business Cycle ◽  
General Equilibrium ◽  
Empirical Evidence ◽  
Equilibrium Model ◽  
Dynamic Stochastic General Equilibrium ◽  
Output Growth ◽  
News Shocks ◽  
Business Cycle Fluctuations ◽  
Forecast Data ◽  
Dynamic Stochastic

The empirical importance of news shocks—anticipated future shocks—in business cycle fluctuations has been explored by using only actual data when estimating models augmented with news shocks. This paper additionally exploits forecast data to identify news shocks in a canonical dynamic stochastic general equilibrium model. The estimated model shows new empirical evidence that technology news shocks are a major source of fluctuations in US output growth. Exploiting the forecast data not only generates more precise estimates of news shocks and other parameters in the model, but also increases the contribution of technology news shocks to the fluctuations.

scholarly journals Microeconomic Origins of Macroeconomic Tail Risks

2017 ◽  
Vol 107 (1) ◽  
pp. 54-108 ◽  
Author(s):  
Daron Acemoglu ◽  
Asuman Ozdaglar ◽  
Alireza Tahbaz-Salehi
Keyword(s):  
Business Cycle ◽  
General Equilibrium ◽  
Normal Distribution ◽  
Equilibrium Model ◽  
Special Role ◽  
Input Output ◽  
Business Cycle Fluctuations ◽  
Wide Range ◽  
Economic Downturns

Using a multisector general equilibrium model, we show that the interplay of idiosyncratic microeconomic shocks and sectoral heterogeneity results in systematic departures in the likelihood of large economic downturns relative to what is implied by the normal distribution. Such departures can emerge even though GDP fluctuations are approximately normally distributed away from the tails, highlighting the different nature of large economic downturns from regular business-cycle fluctuations. We further demonstrate the special role of input-output linkages in generating tail comovements, whereby large recessions involve not only significant GDP contractions, but also large simultaneous declines across a wide range of industries. (JEL D57, E16, E23, E32)

Comments on "Shadow Pricing and Macroeconomic Analysis: Some Illustrations from Pakistan" by Squire et al.

1979 ◽  
Vol 18 (2) ◽  
pp. 113-115
Author(s):  
T. N. Srinivasan
Keyword(s):  
General Equilibrium ◽  
Equilibrium Model ◽  
General Equilibrium Model ◽  
Equilibrium Analysis ◽  
Partial Equilibrium ◽  
Shadow Prices ◽  
Essential Point ◽  
Economic Issues ◽  
Shadow Pricing ◽  
Extreme Sensitivity

The paper is too long for conveying the message that shadow pricing used as a method of analysis in micro-economic issues of project selection is also useful for analysing macro-economic issues, such as foreign and domestic borrowing by the government, emigration, etc. Much of the methodological discussion in the paper is available in a readily accessible form in several publications of each of the coauthors; In contrast, the specific application of the methodology to Pakistani problems is much too cavalier. While it is hard to disagree with the authors' claim that shadow pricing "constitutes a relatively informal attempt to capture general equilibrium effects" (p. 89, emphasis added), their depiction of traditional analysis is a bit of a caricature: essentially it sets up a strawman to knock down. After all in the traditional partial equilibrium analysis, the caveat is always entered that the results are possibly sensitive to violation of the ceteris paribus assumptions of the analysis, though often the analysts will claim that extreme sensitivity is unlikely. Analogously, the shadow pricing method presumes "stationarity" of shadow prices in the sense that they are “independent of policy changes under review" (p. 90). The essential point to be noted is that the validity of this assertion or of the "not too extreme sensitivity" assertion of partial equilibrium analysts can be tested only with a full scale general equilibrium model! At any rate this reviewer would not pose the issue as one of traditional partial equilibrium macro-analysis versus shadow pricing as an approximate general equilibrium analysis, but would prefer a description of project analysis as an approach in which a macro-general equilibrium model of a manageable size (implicit or explicit) is used to derive a set of key shadow prices which are then used in a detailed micro-analysis of projects.

Sign in / Sign up

Export Citation Format

Share Document