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Sectoral slowdowns in the UK: Evidence from transmission probabilities and economic linkages

Author

Listed:
  • Eva Janssens

    (University of Amsterdam)

  • Robin Lumsdaine

    (Erasmus University Rotterdam)

Abstract

This paper studies shock transmission across macroeconomic sectors in the UK, using data from the Bank of England's Flow of Funds statistics. We combine two different approaches to quantify the spread of shocks to assess whether sectors with large bilateral economic linkages as measured through network data have a greater statistical likelihood of shock transmission between them. The combination of both approaches reveals the Monetary Financial Institutions sector's role as shock absorber, and identifies the most important channels of shock transmission. The inferential discrepancies between network data and the actual spillovers highlight the contribution of the proposed methodology.

Suggested Citation

  • Eva Janssens & Robin Lumsdaine, 2021. "Sectoral slowdowns in the UK: Evidence from transmission probabilities and economic linkages," Tinbergen Institute Discussion Papers 21-027/III, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20210027
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    References listed on IDEAS

    as
    1. Andrew T. Foerster & Pierre-Daniel G. Sarte & Mark W. Watson, 2011. "Sectoral versus Aggregate Shocks: A Structural Factor Analysis of Industrial Production," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 1-38.
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    6. repec:ulb:ulbeco:2013/13388 is not listed on IDEAS
    7. Paul Glasserman & Peyton Young, 2015. "Contagion in Financial Networks," Economics Series Working Papers 764, University of Oxford, Department of Economics.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Flow of Funds; contagion; epidemiology; intersectoral networks; Gibbs sampling; Bayesian priors;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • G01 - Financial Economics - - General - - - Financial Crises

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