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

@article{Baqaee2017TheMI,
  title={The Macroeconomic Impact of Microeconomic Shocks: Beyond Hulten's Theorem},
  author={David Rezza Baqaee and Emmanuel Farhi},
  journal={ERN: General Equilibrium Models (Topic)},
  year={2017}
}
  • D. Baqaee, E. Farhi
  • Published 1 February 2017
  • Economics
  • ERN: General Equilibrium Models (Topic)
We provide a nonlinear characterization of the macroeconomic impact of microeconomic TFP shocks in terms of reduced-form non-parametric elasticities for efficient economies. We also provide the mapping from structural parameters to these reduced-form elasticities, under general equilibrium. In this sense, the paper extends the foundational theorem of Hulten (1978) beyond first-order terms to capture nonlinearities. Key features ignored by first-order approximations that play a crucial role are… 
The elastic origins of tail asymmetry
Based on a multisector general equilibrium framework, we show that the sectoral elasticity of substitution plays the key role in the evolution of asymmetric tails of macroeconomic fluctuations and the
Productivity and Misallocation in General Equilibrium
We provide a general non-parametric formula for aggregating microeconomic shocks in general equilibrium economies with distortions such as taxes, markups, frictions to resource reallocation, and
Productivity and Misallocation in General Equilibrium David Rezza Baqaee LSE
We provide a general non-parametric formula for aggregating microeconomic shocks in general equilibrium economies with distortions such as taxes, markups, frictions to resource reallocation, and
WORKING PAPER SERIES WELFARE AND OUTPUT WITH INCOME EFFECTS AND DEMAND INSTABILITY
We provide a general non-parametric characterization of how welfare responds to changes in budget and production possibility sets when preferences are non-homothetic or subject to shocks, in both
International Comovement in the Global Production Network
This paper provides a general and unified framework to study the role of production networks in international GDP comovement. We first derive an additive decomposition of bilateral GDP comovement
Welfare and Output with Income Effects and Taste Shocks
We provide a non-parametric characterization of how welfare responds to changes in budget and production possibility sets when preferences are non-homothetic or subject to shocks, in both partial and
NBER WORKING PAPER SERIES INTERNATIONAL COMOVEMENT IN THE GLOBAL PRODUCTION NETWORK
This paper provides a general and unified framework to study the role of production networks in international GDP comovement. We first derive an additive decomposition of bilateral GDP comovement
NBER WORKING PAPER SERIES SUPPLY AND DEMAND IN DISAGGREGATED KEYNESIAN ECONOMIES WITH AN APPLICATION TO THE COVID-19 CRISIS
We study supply and demand shocks in a general disaggregated model with multiple sectors, factors, and input-output linkages, as well as downward nominal wage rigidities and a zero lower bound
Price Rigidity and the Origins of Aggregate Fluctuations
We document a novel role of heterogeneity in price rigidity: It strongly amplifies the capacity of idiosyncratic shocks to drive aggregate fluctuations. Heterogeneity in price rigidity also
Growth Accounting with Demand Instability and Income Effects
We study how welfare responds to changes in budget and production possibility sets when preferences are unstable or non-homothetic. We characterize the gap between welfare and standard measures of
...
1
2
3
4
5
...

References

SHOWING 1-10 OF 102 REFERENCES
Sectoral Shocks and Aggregate Fluctuations
This paper presents a multisector dynamic general equilibrium model of business cycles with a distinctive feature: aggregate fluctuations are driven by independent sectoral shocks. The model
Productivity and Misallocation in General Equilibrium
We provide a general non-parametric formula for aggregating microeconomic shocks in general equilibrium economies with distortions such as taxes, markups, frictions to resource reallocation, and
Microeconomic Origins of Macroeconomic Tail Risks
We document that even though the normal distribution provides a good approximation to GDP fluctuations, it severely underpredicts “macroeconomic tail risks,” that is, the frequency of large economic
The Aggregate Implications of Regional Business Cycles
We argue that it is difficult to make inferences about the drivers of aggregate business cycles using regional variation alone because (i) the local and aggregate elasticities to the same type of
The Network Origins of Aggregate Fluctuations
This paper argues that in the presence of intersectoral input-output linkages, microeconomic idiosyncratic shocks may lead to aggregate fluctuations. In particular, it shows that, as the economy
The Great Diversification and its Undoing
We investigate the hypothesis that macroeconomic fluctuations are primitively the results of many microeconomic shocks, and show that it has significant explanatory power for the evolution of
Cyclicality and Sectoral Linkages: Aggregate Fluctuations from Independent Sectoral Shocks
The traditional argument against the relevance of sector-specific shocks for the aggregate phenomenon of business cycles invokes the law of large numbers: positive shocks in some sectors are offset
Networks and the Macroeconomy: An Empirical Exploration
The propagation of macroeconomic shocks through input-output and geographic networks can be a powerful driver of macroeconomic fluctuations. We first exposit that in the presence of Cobb-Douglas
Networks, Shocks, and Systemic Risk
This chapter develops a unified framework for the study of how network interactions can function as a mechanism for propagation and amplification of microeconomic shocks. The framework nests various
The Origins of Aggregate Fluctuations in a Credit Network Economy
I show that inter-firm lending plays an important role in business cycle fluctuations. I first build a tractable network model of the economy in which trade in intermediate goods is financed by
...
1
2
3
4
5
...