• Corpus ID: 239015908

The elastic origins of tail asymmetry

@inproceedings{Nakano2021TheEO,
  title={The elastic origins of tail asymmetry},
  author={Satoshi Nakano and Kazuhiko Nishimura},
  year={2021}
}
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 establishment of robustness against productivity shocks. Non-unitary elasticity of substitution renders a nonlinear Domar aggregation, where normal sectoral productivity shocks translate into non-normal aggregated shocks with variable expected output growth. We empirically estimate 100 sectoral… 

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