Search Results
Working Paper
Weathering the Storm: Supply Chains and Climate Risk
We characterize how firms structure supply chains under climate risk. Using new data on the universe of firm-to-firm transactions from an Indian state, we show that firms diversify sourcing locations, and suppliers exposed to climate risk charge lower prices. Our event-study analysis finds that firms with suppliers in flood-affected districts experience a decline in inputs lasting two months, followed by a return to original suppliers. We develop a general equilibrium model of firm input sourcing under climate risk. Firms diversify identical inputs from suppliers across space, trading off the ...
Working Paper
Financial and Production Integration in the Macroeconomy
This paper studies how integration between the financial sector and production networks shapes business cycle transmission. We develop a dynamic model in which banks provide asset-based financing to firms embedded in supply chains. The model highlights two margins of bank–supply chain integration with opposite macroeconomic implications. Extensive-margin integration—captured by firms’ access to banks specializing in different supply chain segments—amplifies negative banking shocks. By contrast, intensive-margin integration—captured by the diffusion of factoring and invoice ...
Working Paper
Accounting for the Sources of Macroeconomic Tail Risks
Using a multi-industry real business cycle model, we empirically examine the microeconomic origins of aggregate tail risks. Our model, estimated using industry-level data from 1972 to 2016, indicates that industry-specific shocks account for most of the third and fourth moments of GDP growth.
Briefing
Networks, Innovation and Productivity: A Conference Recap
How do employment targets affect firm dynamics? What is the relationship between inventor migration, and local productivity and knowledge spillovers? How are surplus gains from inventions distributed? These were among the questions addressed by economists during a recent Richmond Fed research conference.Economists from the Richmond Fed, research universities and other institutions met in Richmond for a conference in May. Researchers presented papers on a variety of topics, including digital advertising, R&D allocation, production networks, and knowledge creation and diffusion.
Working Paper
Misallocation and Intersectoral Linkages
We analytically characterize the aggregate productivity loss from allocative distortions in a setting that accounts for the sectoral linkages of production. We show that the effects of distortions and the role of sectoral linkages depend crucially on how substitutable inputs are. We find that the productivity loss is smaller if input substitutability is low. Moreover, with low input substitutability, sectoral linkages do not systematically amplify the effects of distortions. In addition, the impact of the sectors that supply intermediate inputs becomes smaller. We quantify these effects in ...
Working Paper
How Do Sectoral Shocks Shape Future GDP?
A production sector's size, as measured by its Domar weight, captures the contemporaneous aggregate effect of its productivity shocks. However, the presence of investment means that these aggregate effects can persist over time. We derive a dynamic generalization of Hulten's theorem in an environment that features sectoral linkages in both intermediate-inputs and investment. This generalization follows from production efficiency alone, and decomposes each sector's Domar weight into an impact and a propagation component. The relative size of these components then determines how persistent the ...
Working Paper
Financial and Production Integration in the Macroeconomy
This paper studies how integration between the financial sector and production networks shapes business cycle transmission. We develop a dynamic model in which banks provide asset-based financing to firms embedded in supply chains. The model highlights two margins of bank–supply chain integration with opposite macroeconomic implications. Extensive-margin integration—captured by firms’ access to banks specializing in different supply chain segments—amplifies negative banking shocks. By contrast, intensive-margin integration—captured by the diffusion of factoring and invoice ...
Construction’s Impact on Other Industries during the Great Recession
Industries that trade heavily with the construction industry were hit sooner and harder by the Great Recession than those that don’t.
Working Paper
Sectoral Impact of COVID-19: Cascading Risks
Workers are unequal in the face of the COVID-19 pandemic: Those who work in essential sectors face higher health risk whereas those in non-essential social-consumption sectors face greater economic risk. We study how these health and economic risks cascade into other sectors through supply chains and demand linkages. In the U.S., we find the cascading effects account for about 25-30% of the exposure to both risks. The cascading effect increases the health risk faced by workers in the transportation and retail sectors, and it increases the economic risk faced by workers in the textile and ...
Conference Paper
Jackson Hole 2023 - Global Production Networks