Microeconomic Origins of Macroeconomic Tail Risks
Using a multisector general equilibrium model, we show that the interplay of idiosyncratic microeconomic shocks and sectoral heterogeneity results in systematic departures in the likelihood of large economic downturns relative to what is implied by the normal distribution. Such departures can emerge...
| Main Authors: | , , , , |
|---|---|
| Other Authors: | |
| Format: | Article |
| Language: | en_US |
| Published: |
American Economic Association
2017
|
| Online Access: | http://hdl.handle.net/1721.1/110995 https://orcid.org/0000-0003-0908-7491 https://orcid.org/0000-0002-1827-1285 |
| _version_ | 1826206219753226240 |
|---|---|
| author | Acemoglu, Daron Ozdaglar, Asuman Tahbaz-Salehi, Alireza Acemoglu, K. Daron Koksal, Asuman E. |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Acemoglu, Daron Ozdaglar, Asuman Tahbaz-Salehi, Alireza Acemoglu, K. Daron Koksal, Asuman E. |
| author_sort | Acemoglu, Daron |
| collection | MIT |
| description | Using a multisector general equilibrium model, we show that the interplay of idiosyncratic microeconomic shocks and sectoral heterogeneity results in systematic departures in the likelihood of large economic downturns relative to what is implied by the normal distribution. Such departures can emerge even though GDP fluctuations are approximately normally distributed away from the tails, highlighting the different nature of large economic downturns from regular business-cycle fluctuations. We further demonstrate the special role of input-output linkages in generating tail comovements, whereby large recessions involve not only significant GDP contractions, but also large simultaneous declines across a wide range of industries. |
| first_indexed | 2024-09-23T13:25:59Z |
| format | Article |
| id | mit-1721.1/110995 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T13:25:59Z |
| publishDate | 2017 |
| publisher | American Economic Association |
| record_format | dspace |
| spelling | mit-1721.1/1109952022-10-01T15:16:43Z Microeconomic Origins of Macroeconomic Tail Risks Acemoglu, Daron Ozdaglar, Asuman Tahbaz-Salehi, Alireza Acemoglu, K. Daron Koksal, Asuman E. Massachusetts Institute of Technology. Department of Economics Massachusetts Institute of Technology. Department of Electrical Engineering and Computer Science Massachusetts Institute of Technology. Laboratory for Information and Decision Systems Acemoglu, K. Daron Koksal, Asuman E. Using a multisector general equilibrium model, we show that the interplay of idiosyncratic microeconomic shocks and sectoral heterogeneity results in systematic departures in the likelihood of large economic downturns relative to what is implied by the normal distribution. Such departures can emerge even though GDP fluctuations are approximately normally distributed away from the tails, highlighting the different nature of large economic downturns from regular business-cycle fluctuations. We further demonstrate the special role of input-output linkages in generating tail comovements, whereby large recessions involve not only significant GDP contractions, but also large simultaneous declines across a wide range of industries. 2017-08-21T19:33:08Z 2017-08-21T19:33:08Z 2017-01 Article http://purl.org/eprint/type/JournalArticle 0002-8282 1944-7981 http://hdl.handle.net/1721.1/110995 Acemoglu, Daron, et al. “Microeconomic Origins of Macroeconomic Tail Risks.” American Economic Review 107, 1 (January 2017): 54–108 © 2017 American Economic Association https://orcid.org/0000-0003-0908-7491 https://orcid.org/0000-0002-1827-1285 en_US http://dx.doi.org/10.1257/aer.20151086 American Economic Review Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use. application/pdf American Economic Association American Economic Association |
| spellingShingle | Acemoglu, Daron Ozdaglar, Asuman Tahbaz-Salehi, Alireza Acemoglu, K. Daron Koksal, Asuman E. Microeconomic Origins of Macroeconomic Tail Risks |
| title | Microeconomic Origins of Macroeconomic Tail Risks |
| title_full | Microeconomic Origins of Macroeconomic Tail Risks |
| title_fullStr | Microeconomic Origins of Macroeconomic Tail Risks |
| title_full_unstemmed | Microeconomic Origins of Macroeconomic Tail Risks |
| title_short | Microeconomic Origins of Macroeconomic Tail Risks |
| title_sort | microeconomic origins of macroeconomic tail risks |
| url | http://hdl.handle.net/1721.1/110995 https://orcid.org/0000-0003-0908-7491 https://orcid.org/0000-0002-1827-1285 |
| work_keys_str_mv | AT acemogludaron microeconomicoriginsofmacroeconomictailrisks AT ozdaglarasuman microeconomicoriginsofmacroeconomictailrisks AT tahbazsalehialireza microeconomicoriginsofmacroeconomictailrisks AT acemoglukdaron microeconomicoriginsofmacroeconomictailrisks AT koksalasumane microeconomicoriginsofmacroeconomictailrisks |