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Real sectoral spillovers: A dynamic factor analysis of the great recession

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  • Li, Nan
  • Martin, Vance L.

Abstract

Dynamic factor methods are used to identify the impact of common and idiosyncratic shocks on sixteen U.S. nonfarm business sectors. This paper then studies changes in the transmission of these shocks across sectors during the Great Recession, and evaluates the cross-sectoral spillovers. The Great Recession is found to be largely a time of heightened impact of common shocks–which accounts for 3/4 of aggregate volatility–and large spillovers of negative finance-related shocks. In addition, prior to the Recession, aggregate fluctuations are mainly driven by sector-specific shocks, in contrast with findings from previous studies.

Suggested Citation

  • Li, Nan & Martin, Vance L., 2019. "Real sectoral spillovers: A dynamic factor analysis of the great recession," Journal of Monetary Economics, Elsevier, vol. 107(C), pages 77-95.
    • Handle: RePEc:eee:moneco:v:107:y:2019:i:c:p:77-95
    DOI: 10.1016/j.jmoneco.2018.10.002
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    Cited by:

    1. Ha Nguyen & Shawheen Rezaei & Divya Agarwal, 2022. "The great recession and job loss spillovers: impact of tradable employment shocks on supporting services," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 68(3), pages 789-815, June.
    2. Michele Boldrin & Carlos Garriga & Adrian Peralta-Alva & Juan M. Sanchez, 2020. "Reconstructing the Great Recession," Review, Federal Reserve Bank of St. Louis, vol. 102(3), pages 271-311, July.
    3. Guisinger, Amy Y. & Owyang, Michael T. & Soques, Daniel, 2024. "Industrial Connectedness and Business Cycle Comovements," Econometrics and Statistics, Elsevier, vol. 29(C), pages 132-149.
    4. Jorge Miranda-Pinto & Gang Zhang, 2022. "Trade Credit and Sectoral Comovement during Recessions," Working Papers Central Bank of Chile 961, Central Bank of Chile.
    5. Mohamed Buheji & Dunya Ahmed, 2020. "Planning for 'The New Normal': Foresight and Management of the Possibilities of Socio-economic Spillovers due to COVID-19 Pandemic," Business Management and Strategy, Macrothink Institute, vol. 11(1), pages 160-179, June.
    6. Casalis, André & Krustev, Georgi, 2022. "Cyclical drivers of euro area consumption: What can we learn from durable goods?," Journal of International Money and Finance, Elsevier, vol. 120(C).

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    More about this item

    Keywords

    Intersectoral linkages; Dynamic factor models; Spillovers; Real business cycles; Input-output structure;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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