Uncertainty and sectoral shifts: The Interaction between firm-level and aggregate-level shocks, and macroeconomic activity

Journal Article (Journal Article)

This study predicts and finds that the interaction of firm-level and aggregatelevel shocks explains a significant portion of shocks to macroeconomic activity. Specifically, we hypothesize that the relation between uncertainty and economic growth is most pronounced when both firm-level and aggregate-level uncertainty are high simultaneously. Similarly, we hypothesize that aggregate performance affects unemployment most when both firm-level dispersion is high and aggregate performance is low, based on the sectoral shift theory. Our hypotheses and empirical results show that the interactive effect of firm-level and aggregate-level shocks are larger than the sum of the individual effects.

Full Text

Duke Authors

Cited Authors

  • Kalay, A; Nallareddy, S; Sadka, G

Published Date

  • January 1, 2018

Published In

Volume / Issue

  • 64 / 1

Start / End Page

  • 198 - 214

Electronic International Standard Serial Number (EISSN)

  • 1526-5501

International Standard Serial Number (ISSN)

  • 0025-1909

Digital Object Identifier (DOI)

  • 10.1287/mnsc.2016.2581

Citation Source

  • Scopus