I quantify the contribution of sectoral shocks to business cycle fluctuations in aggregate output. I develop and estimate a multi-industry general equilibrium model in which each industry employs the material and capital goods produced by other sectors. Using data on US industries' input prices and input choices, I find that the goods produced by different industries are complements to one another as inputs in downstream industries' production functions. These complementarities indicate that industry-specific shocks are substantially more important than previously thought, accounting for at least half of aggregate volatility. (JEL D12, D24, E23, E32, L14)

We use broad-based yet detailed data from the economy's goods-producing sectors to investigate firms' ownership of production chains. It does not appear that vertical ownership is primarily used to facilitate transfers of goods along the production chain, as is often presumed: Roughly one-half of upstream establishments report no shipments to downstream establishments within the same firm. We propose an alternative explanation for vertical ownership, namely that it promotes efficient intra-firm transfers of intangible inputs. We show evidence consistent with this hypothesis, including the fact that, after a change of ownership, an acquired establishment begins to resemble the acquiring firm along multiple dimensions.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in WO R K I N G PA PE R S E R I E S N O 98 6 / D E C E M B E R 20 0 8In 2008 all ECB publications feature a motif taken from the 10 banknote. provided an opportunity for participating central bank experts to exchange views and foster debate, also in interaction with international organizations and academic institutions. The first day of the workshop addressed issues related to the macro-perspective of the money market, drawing on the experiences of a large number of countries. The second day adopted a micro-perspective on the money market, looking in particular at trading behaviour in the overnight money market and its implications for the evolution of spreads. THE TOPOLOGY OF THE FEDERALA first version of this paper was presented at this workshop. The papers presented at the time of the workshop did not consider the potential implications of the financial turmoil for the results of the paper, given that the tensions in money markets emerged in August 2007. The published version of these papers represents an update of the original paper, which incorporates the discussion which took place at the workshop and in most cases a discussion on the developments in the money markets since August 2007. ECB Working Paper Series No 986December 2008 Abstract 4

Complex social networks have received increasing attention from researchers. Recent work has focused on mechanisms that produce scale-free networks. We theoretically and empirically characterize the buyer-supplier network of the US economy and find that purely scale-free models have trouble matching key attributes of the network. We construct an alternative model that incorporates realistic features of firms' buyer-supplier relationships and estimate the model's parameters using microdata on firms' self-reported customers. This alternative framework is better able to match the attributes of the actual economic network and aids in further understanding several important economic phenomena.industrial organization | network dynamics F irms' interconnections through buyer-supplier relationships affect economic phenomena ranging from the spread of innovative ideas (1) to the transmission of economic shocks (2) to trade patterns (3). Recognizing this, economists have started to pay explicit attention to firm network structures (refs. 4 and 5 and the studies discussed in ref. 6). However, no one has theoretically or empirically characterized the actual firm network structure in any large economy. Here, we establish basic features of the buyer-supplier network of firms in the United States and develop a model of firm birth, death, and input-output link formation that closely replicates the observed network.Earlier research modeled the formation and structure of complex social networks more broadly. Examples include links on the worldwide web (7), job-search networks (8), and friendships (9); refs. 10 and 11 have recent surveys. Much of this recent work was spurred by seminal work (7) documenting the scalefree nature of many networks. We show, however, that scale-free network models miss important elements of the US economy's firm network. In particular, the fat-tail nature of scale-free networks overstates the connectivity of the economy's most central vertices-that is, the most vertically interconnected firms. At the same time, it overpredicts the number of minimally connected firms.We propose an alternative model of network formation that better matches the connectivity distribution of US firms. Following the model in ref. 12, our model adds processes for vertex (firm) death and reattachment of those edges (buyersupplier relationships) among surviving firms. It also allows new edges to be formed through a mix of the preferential attachment mechanisms emblematic of scale-free network models (where new edges are more likely to be formed with vertices that already have more edges) and random attachment (similar to that in ref. 13). Although these extensions are sparsely parameterized, they considerably extend the ability of network formation models to match observed firm network structures. Importantly, they also embody realistic features of the actual firm network: firms often go out of business, and many suppliers actively prefer to work with less-connected downstream firms because of product specialization and long-...

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in WO R K I N G PA PE R S E R I E S N O 98 6 / D E C E M B E R 20 0 8In 2008 all ECB publications feature a motif taken from the 10 banknote. provided an opportunity for participating central bank experts to exchange views and foster debate, also in interaction with international organizations and academic institutions. The first day of the workshop addressed issues related to the macro-perspective of the money market, drawing on the experiences of a large number of countries. The second day adopted a micro-perspective on the money market, looking in particular at trading behaviour in the overnight money market and its implications for the evolution of spreads. THE TOPOLOGY OF THE FEDERALA first version of this paper was presented at this workshop. The papers presented at the time of the workshop did not consider the potential implications of the financial turmoil for the results of the paper, given that the tensions in money markets emerged in August 2007. The published version of these papers represents an update of the original paper, which incorporates the discussion which took place at the workshop and in most cases a discussion on the developments in the money markets since August 2007. ECB Working Paper Series No 986December 2008 Abstract 4