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Upstream, Downstream & Common Firm Shocks
We develop a multi-sector DSGE model to calculate upstream and downstream industry exposure networks from U.S. input-output tables and test the relative importance of shocks from each direction by comparing these with estimated networks of firms? equity return responses to one another. The correlations between the upstream exposure and equity return networks are large and statistically significant, while the downstream exposure networks have lower ? but still positive ? correlations that are not statistically significant. These results suggest a low short-term elasticity of substitution ...