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Shock transmissions and business linkages among US sectors

Author

Listed:
  • Linh Xuan Diep Nguyen

    (University of Leicester, Brookfield)

  • Thanaset Chevapatrakul

    (University of Nottingham)

  • Simona Mateut

    (University of Nottingham)

Abstract

This paper examines the shock spillovers between US sectors and their dependence on the intersectoral business linkages. Our forecast error variance decompositions reveal significant shock transmissions among trading sectors, especially in turbulent periods such as the financial crisis and the COVID-19 pandemic. The dymamics of shock spillovers reflect the impacts of the pandemic on economic sectors. Shock spillovers are shown to be influenced by the strength of the intersectoral trading relationships. Shocks to a sector’s important supplier have a strong impact on the forecast error variance of the sector’s stock return. The total directional spillovers from/ to a sector are linked with the number of close commercial linkages between that sector and other sectors.

Suggested Citation

  • Linh Xuan Diep Nguyen & Thanaset Chevapatrakul & Simona Mateut, 2023. "Shock transmissions and business linkages among US sectors," Annals of Operations Research, Springer, vol. 330(1), pages 517-552, November.
    • Handle: RePEc:spr:annopr:v:330:y:2023:i:1:d:10.1007_s10479-022-04979-8
    DOI: 10.1007/s10479-022-04979-8
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    More about this item

    Keywords

    Asset pricing; Stock market; Shock transmission; Variance decomposition; Connectedness; Input–output linkage;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • E16 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Social Accounting Matrix
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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