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- Title
Uncertainty and Sectoral Shifts: The Interaction Between Firm-Level and Aggregate-Level Shocks, and Macroeconomic Activity.
- Authors
Kalay, Alon; Nallareddy, Suresh; Sadka, Gil
- Abstract
This study predicts and finds that the interaction of firm-level and aggregatelevel shocks explains a significant portion of shocks to macroeconomic activity. Specifically, we hypothesize that the relation between uncertainty and economic growth is most pronounced when both firm-level and aggregate-level uncertainty are high simultaneously. Similarly, we hypothesize that aggregate performance affects unemployment most when both firm-level dispersion is high and aggregate performance is low, based on the sectoral shift theory. Our hypotheses and empirical results show that the interactive effect of firm-level and aggregate-level shocks are larger than the sum of the individual effects.
- Subjects
MACROECONOMICS; CORPORATE profits; UNCERTAINTY; UNEMPLOYMENT; ECONOMIC activity
- Publication
Management Science, 2018, Vol 64, Issue 1, p198
- ISSN
0025-1909
- Publication type
Article
- DOI
10.1287/mnsc.2016.2581