CREAT: Census Research Exploration and Analysis Tool

HOW IMPORTANT ARE SECTORAL SHOCKS

September 2014

Written by: Enghin Atalay

Working Paper Number:

CES-14-31

Abstract

I quantify the contribution of sectoral shocks to business cycle fluctuations in aggregate output. I develop a multi-industry general equilibrium model in which each industry employs the material and capital goods produced by other sectors, and then estimate this model using data on U.S. industries sales, output prices, and input choices. Maximum likelihood estimates indicate that industry-specific shocks account for nearly two-thirds of the volatility of aggregate output, substantially larger than previously assessed. Identification of the relative importance of industry-specific shocks comes primarily from data on industries intermediate input purchases, data that earlier estimations of multi-industry models have ignored.

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:
demand, production, macroeconomic, manufacturing, enterprise, industrial, sale, aggregate, sector, autoregressive, forecast, industry output, sectoral, equilibrium, gdp, productivity shocks, fluctuation, retail, shock

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:
Bureau of Economic Analysis, Federal Reserve Bank

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