The Relative Importance of Aggregate and Sectoral Shocks and the Changing Nature of Economic Fluctuations

2018 ◽  
Vol 10 (1) ◽  
pp. 119-148 ◽  
Author(s):  
Julio Garin ◽  
Michael J. Pries ◽  
Eric R. Sims
Keyword(s):  
Business Cycle ◽  
Labor Productivity ◽  
Principal Components ◽  
Economic Fluctuations ◽  
Relative Importance ◽  
Aggregate Shocks ◽  
Labor Reallocation ◽  
Aggregate Output ◽  
Sectoral Shocks ◽  
Two Sectors

A principal components decomposition of sectoral IP data reveals that the contribution of aggregate shocks to the variance of aggregate output declined from about 70 percent in the period 1967–1983 to about 30 percent after 1983. We develop an “islands” model with two sectors and costly labor reallocation to investigate how this change in the relative importance of shocks alters business cycle moments. A version of the model with relatively more important sectoral shocks results in a sizeable decline in the cyclicality of labor productivity and is consistent with changes in several other business cycle moments observed in the data. (JEL E13, E23, E24, E32, J21, J24)

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)

SHOCKS AND FRICTIONS IN THAI ECONOMY: THROUGH THE LENS OF BUSINESS CYCLE ACCOUNTING

2020 ◽  
pp. 1-15
Author(s):  
VIMUT VANITCHAREARNTHUM
Keyword(s):  
Business Cycle ◽  
Open Economy ◽  
Prime Factor ◽  
Aggregate Fluctuations ◽  
Aggregate Output ◽  
Business Cycle Accounting ◽  
Labor Wedge ◽  
Model Set ◽  
Set Up ◽  
Investment Fluctuation

This paper applies business cycle accounting methodology to analyze the sources of aggregate fluctuations in Thai economy, especially during the recent severe recessions in 1997–1998 and 2008–2009. This exploration helps researchers uncover possible shocks and frictions that drive business cycle in a small and open economy within a minimal model set-up. Under this methodology, a fluctuation in aggregate output can be accounted for by exogenous time-varying wedges, namely efficiency wedge, investment wedge, labor wedge, government wedge, etc. This study found that the efficiency wedge is essential in accounting for aggregate output, consumption and investment fluctuation, while the bond wedge, which only present in an open economy setting, is a prime factor in accounting for movement in current accounts. I conducted counterfactual experiments to see what accounts for the output drop during recent recessions. I find that the efficiency wedge played a key role in recent recessions in Thailand, while the investment wedge was accounted for slow economic recovery after the recessions.

scholarly journals News-Driven Business Cycles: Insights and Challenges

2014 ◽  
Vol 52 (4) ◽  
pp. 993-1074 ◽  
Author(s):  
Paul Beaudry ◽  
Franck Portier
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Empirical Evidence ◽  
Economic Fluctuations ◽  
Aggregate Fluctuations ◽  
Business Cycle Fluctuations ◽  
Widespread Belief ◽  
Way Of Thinking ◽  
The Many

There is a widespread belief that changes in expectations may be an important independent driver of economic fluctuations. The news view of business cycles offers a formalization of this perspective. In this paper we discuss mechanisms by which changes in agents' information, due to the arrival of news, can cause business cycle fluctuations driven by expectational change, and we review the empirical evidence aimed at evaluating their relevance. In particular, we highlight how the literature on news and business cycles offers a coherent way of thinking about aggregate fluctuations, while at the same time we emphasize the many challenges that must be addressed before a proper assessment of the role of news in business cycles can be established. (JEL D83, D84, E13, E32, O33)

Acoustic Differentiation of Laryngeal, Esophageal, and Tracheoesophageal Speech

1984 ◽  
Vol 27 (4) ◽  
pp. 577-585 ◽  
Author(s):  
Joanne Robbins
Keyword(s):  
Speech Production ◽  
Principal Components ◽  
Discriminant Function Analysis ◽  
Group Membership ◽  
Function Analysis ◽  
Relative Importance ◽  
Vocal Rehabilitation ◽  
Tracheoesophageal Speech ◽  
Components Analysis ◽  
Temporal Measures

This investigation was designed to determine if a multivariate acoustic classifier could effectively discriminate group membership for 15 tracheoesophageal, esophageal, and laryngeal speakers. Seven intensity, 10 frequency, and 13 duration measures were quantified from recorded voice samples. Using principal components analysis, a subset of the 13 least redundant acoustic and temporal measures was systematically selected from the 30 original measures and analyzed singly and jointly in terms of its ability to discriminate among the three speaker groups. Discriminant function analysis revealed perfect categorization of the 45 subjects, indicating that the three methods of speech production are acoustically and temporally distinct from one another. The relative importance of the selected variables which, in combination, significantly differentiated the three groups is discussed in relation to physiologic differences among groups and clinical application for postlaryngectomy vocal rehabilitation.

Profits and GDP in the basic model

2019 ◽  
pp. 32-53
Author(s):  
Kazimierz Łaski
Keyword(s):  
Labor Productivity ◽  
Total Output ◽  
Capitalist Economy ◽  
Basic Model ◽  
Consumption Goods ◽  
The Stability ◽  
Two Sectors ◽  
Investment Multiplier ◽  
Multiplier Process

In the basic model it is assumed that the economy is closed and there is no government. In this situation, with two sectors producing respectively investment and consumption goods, total output and employment are determined by investment through the Keynesian investment multiplier. This result obtains because the capitalist economy is demand-constrained. By contrast, the centrally planned socialist economies were supply-constrained. In the capitalist economy the multiplier process ensures that investment finances itself through providing exactly the same amount of saving as investment in any given period. However, the condition for the stability of this result is the rise in wages with labor productivity.

scholarly journals The Macroeconomic Impact of Microeconomic Shocks: Beyond Hulten's Theorem

Econometrica ◽  
2019 ◽  
Vol 87 (4) ◽  
pp. 1155-1203 ◽  
Author(s):  
David Rezza Baqaee ◽  
Emmanuel Farhi
Keyword(s):  
Returns To Scale ◽  
The United States ◽  
Reduced Form ◽  
Average Output ◽  
Aggregate Output ◽  
First Order ◽  
Point Reduction ◽  
Sectoral Shocks ◽  
Long Run ◽  
Macroeconomic Impact

We provide a nonlinear characterization of the macroeconomic impact of microeconomic productivity shocks in terms of reduced‐form nonparametric elasticities for efficient economies. We also show how microeconomic parameters are mapped to these reduced‐form general equilibrium elasticities. In this sense, we extend the foundational theorem of Hulten (1978) beyond the first order to capture nonlinearities. Key features ignored by first‐order approximations that play a crucial role are: structural microeconomic elasticities of substitution, network linkages, structural microeconomic returns to scale, and the extent of factor reallocation. In a business‐cycle calibration with sectoral shocks, nonlinearities magnify negative shocks and attenuate positive shocks, resulting in an aggregate output distribution that is asymmetric (negative skewness), fat‐tailed (excess kurtosis), and has a negative mean, even when shocks are symmetric and thin‐tailed. Average output losses due to short‐run sectoral shocks are an order of magnitude larger than the welfare cost of business cycles calculated by Lucas (1987). Nonlinearities can also cause shocks to critical sectors to have disproportionate macroeconomic effects, almost tripling the estimated impact of the 1970s oil shocks on world aggregate output. Finally, in a long‐run growth context, nonlinearities, which underpin Baumol's cost disease via the increase over time in the sales shares of low‐growth bottleneck sectors, account for a 20 percentage point reduction in aggregate TFP growth over the period 1948–2014 in the United States.

scholarly journals Are the New Basel III Capital Buffers Countercyclical? Exploring the Option of a Rule-Based Countercyclical Buffer

2018 ◽  
pp. 1-6
Author(s):  
Filippo Occhino
Keyword(s):  
Business Cycle ◽  
Banking System ◽  
Capital Requirements ◽  
Economic Fluctuations ◽  
Capital Regulation ◽  
Basel Iii ◽  
Rule Based ◽  
The Business Cycle ◽  
Over Time

Countercyclical capital regulation can reduce the procyclicality of the banking system and dampen aggregate economic fluctuations. I describe two new capital buffers introduced in Basel III and discuss why their countercyclical effects may be small. If over time regulators want to increase the degree of countercyclicality of capital regulation, they might consider adopting a rule-based countercyclical buffer, that is, a buffer that is automatically lowered during recessions according to a rule. I present a conservative example of such a rule and its effects on capital requirements over the business cycle.

scholarly journals Neglected Theories of Business Cycle—Alternative Ways of Explaining Economic Fluctuations

Data ◽  
2021 ◽  
Vol 6 (11) ◽  
pp. 109
Author(s):  
Klára Čermáková ◽  
Michal Bejček ◽  
Jan Vorlíček ◽  
Helena Mitwallyová
Keyword(s):  
Business Cycle ◽  
Theoretical Foundation ◽  
Behavioral Approach ◽  
Economic Fluctuations ◽  
Economic Research ◽  
Economic Cycle ◽  
Total Product ◽  
The Business Cycle ◽  
Individual Strategies ◽  
Insight Into

The business cycle is a frequent topic in economic research; however, the approach based on individual strategies often remains neglected. The aspiration of this study is to prove that the behavior of individuals can originate and fuel an economic cycle. For this purpose, we are using an algorithm based on a repeated dove–hawk game. The results reveal that the sum of output in a society is affected by the ratio of individual strategies. Cyclical changes in this ratio will be translated into fluctuations of the total product of society. We present game theory modelling of a strategic behavioral approach as a valid theoretical foundation for explaining economic fluctuations. This article offers an unusual insight into the business cycle’s causes and growth theories.

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