International Comovement in the Global Production Network
Time：9:00am - 10:30am, Mar. 26, 2021
Meeting ID：980 9640 9692
This paper provides a general and unified framework to study the role of production networks in international GDP comovement. We first derive an additive decomposition of bilateral GDP comovement into components capturing shock transmission and shock correlation. We quantify this decomposition in a parsimonious multi-country, multi-sector network propagation model featuring a single composite supply shock, with data for 29 countries and up to 30 years. We find that while the network transmission of shocks is quantitatively important, it accounts for a minority of observed comovement under a range of standard values of structural elasticities. To assess the role of delayed propagation and intertemporal shocks– features absent in the standard static framework– we extend both the accounting decomposition and the model to a dynamic setting and enrich the space of shocks. Quantitatively, delayed propagation contributes relatively little to the overall GDP comovement compared to the impact effects captured by the static production network model. Models featuring two intratemporal shocks (TFP and labor supply) strike a good balance between parsimony and fit to the data.
Professor Zhen Huo is an Assistant Professor of Economics at Yale University and he is also a macroeconomist whose research focuses on the role of information and financial frictions in shaping aggregate fluctuations. Professor Huo’s fields of interest include labor economics and macroeconomics. His previous work provides a method to solve the rational expectations models with higher order beliefs. He applied this method to measure the importance of belief shocks in accounting for business cycles. Another line of his research explores the link between household financial difficulties and the recent Great Recession. He is the speaker in the 2015 Restud Tour. He received his Ph.D. in economics from the University of Minnesota in 2015.