How Important are Sectoral Shocks?

Enghin Atalay
2014 Social Science Research Network  
I quantify the contribution of sectoral shocks to business cycle ‡uctuations 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-speci...c shocks account for nearly two-thirds of the volatility of aggregate output, substantially larger
more » ... ubstantially larger than previously assessed. Identi...cation of the relative importance of industry-speci...c shocks comes primarily from data on industries'intermediate input purchases, data that earlier estimations of multi-industry models have ignored.
doi:10.2139/ssrn.2523424 fatcat:sekycuij4fct5gvbmgwepesupu