The origins of aggregate fluctuations in a credit network economy

Altinoglu, Levent

doi:10.1016/j.jmoneco.2020.01.007

Cited by 42 publications

(19 citation statements)

References 23 publications

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“…Internal and external shocks, according to reference [1], might induce output volatility. It is confirmed by the findings of reference [3], who discovered that financial shocks were the primary driver of cyclical fluctuations, particularly during the Great Recession.…”

Section: Introductionsupporting

confidence: 57%

Economic fluctuations and monetary policy on the stock market during the COVID-19 pandemic in Indonesia

2022

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The purpose of this study is to examine the stock market’s resiliency in the face of economic fluctuations and a crisis caused by the COVID-19 outbreak. using monthly data from 2011 to 2020 and an error correction model with the Composite Stock Price Index (conventional stock market system) and the Jakarta Islamic Index (Islamic stock market system) as dependent variables and policy interest rates, exchange rates, inflation, and crises as independent variables. In both stock market models, the regression results reveal that there is a short-term to long-term equilibrium relationship. Interest rates set by policymakers and crisis variables have a detrimental impact. In the long run, the exchange rate has a beneficial effect, and inflation has no influence on the two stock markets. In the short run, the findings in both markets are nearly identical, meaning that inflation and policy interest rates have little influence, whereas exchange rates have a negative impact. The crisis, on the other hand, had no impact on the JCI stock market. The crisis had a positive impact on the JII stock market, unlike the JII stock market. These findings are significant because they reveal a distinction that leads to a significant increase in the number of investors who believe it is safe to invest in the Islamic stock market in the short term, notwithstanding the crisis.

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Section: Introductionsupporting

confidence: 57%

Economic fluctuations and monetary policy on the stock market during the COVID-19 pandemic in Indonesia

2022

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“…Moreover, an ine cient discrepancy between labor and consumption, and the resulting employment choices, arise in their set-up due to general equilibrium e↵ects. Altinoglu (2018), Reischer (2019) and Luo (2020) use similar frameworks to study the impact of inter-firm trade credit through calibration exercises. Jacobson and von Schedvin (2015) study the exposure of Swedish firms to corporate bankruptcies through trade credit in production chains and find that trade creditors su↵er 50% higher losses than banks lending to the corporate sector.…”

Section: Introductionmentioning

confidence: 99%

Financial Constraints and Propagation of Shocks in Production Networks

Demir

Javorcik

Michalski

et al. 2024

Review of Economics and Statistics

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We examine propagation of a small unexpected supply shock through a production network and the role financial constraints play in its transmission. Using data on almost all Turkish supplier-customer links, we exploit the heterogeneous impact of an unexpected import-tax increase for identification. We find that this relatively minor shock had a non-trivial economic impact on exposed firms and propagated downstream through affected suppliers. Importantly, we show that low-liquidity firms amplified its transmission.

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“… Some recent papers have investigated aggregate volatility in production networks with inefficient equilibria (where Hulten's theorem does not hold). Some examples include Bigio and La'O (), Baqaee (), Altinoglu (), Grassi (), and Baqaee and Farhi (). See also Jones (, ), Bartelme and Gorodnichenko (), and Liu (). …”

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confidence: 99%

The Macroeconomic Impact of Microeconomic Shocks: Beyond Hulten's Theorem

Baqaee¹,

Farhi

2019

ECTA

343

234

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We provide a nonlinear characterization of the macroeconomic impact of microeconomic productivity shocks in terms of reduced‐form nonparametric elasticities for efficient economies. We also show how microeconomic parameters are mapped to these reduced‐form general equilibrium elasticities. In this sense, we extend the foundational theorem of Hulten (1978) beyond the first order to capture nonlinearities. Key features ignored by first‐order approximations that play a crucial role are: structural microeconomic elasticities of substitution, network linkages, structural microeconomic returns to scale, and the extent of factor reallocation. In a business‐cycle calibration with sectoral shocks, nonlinearities magnify negative shocks and attenuate positive shocks, resulting in an aggregate output distribution that is asymmetric (negative skewness), fat‐tailed (excess kurtosis), and has a negative mean, even when shocks are symmetric and thin‐tailed. Average output losses due to short‐run sectoral shocks are an order of magnitude larger than the welfare cost of business cycles calculated by Lucas (1987). Nonlinearities can also cause shocks to critical sectors to have disproportionate macroeconomic effects, almost tripling the estimated impact of the 1970s oil shocks on world aggregate output. Finally, in a long‐run growth context, nonlinearities, which underpin Baumol's cost disease via the increase over time in the sales shares of low‐growth bottleneck sectors, account for a 20 percentage point reduction in aggregate TFP growth over the period 1948–2014 in the United States.

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The origins of aggregate fluctuations in a credit network economy

Cited by 42 publications

References 23 publications

Economic fluctuations and monetary policy on the stock market during the COVID-19 pandemic in Indonesia

Economic fluctuations and monetary policy on the stock market during the COVID-19 pandemic in Indonesia

Financial Constraints and Propagation of Shocks in Production Networks

The Macroeconomic Impact of Microeconomic Shocks: Beyond Hulten's Theorem

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