Firm-Level Shocks and GDP Growth: The Case of Boeing’s 737 MAX Production Pause
Abstract: Large firms play an integral role in aggregate economic activity owing to their size and production linkages. Events specific to these large firms can thus have significant effects on the macroeconomy. Quantifying these effects is tricky, however, given the complexity of the production process and the difficulty in identifying firm-level events. The recent pause in Boeing’s 737 MAX production is a striking example of such an event or “shock” to a large firm. This post applies a basic framework that is grounded in economic theory to provide a back-of-the envelope calculation of how the “737 MAX shock” could impact U.S. GDP growth in the first quarter of 2020.
JEL Classification: E2;
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Provider: Federal Reserve Bank of New York
Part of Series: Liberty Street Economics
Publication Date: 2020-02-13