Complementarities and Comovements

42 Pages Posted: 1 Aug 2000 Last revised: 1 Jan 2023

See all articles by John Shea

John Shea

University of Maryland - Department of Economics

Date Written: October 1995

Abstract

Short-run interindustry comovement may be due either to common shocks or to complementarities that propagate shocks across sectors. This paper assesses the importance of input-output linkages, aggregate activity spillovers, and local activity spillovers to comovement in postwar US manufacturing. I find that input-output linkages and local activity spillovers are important to comovement, while aggregate activity spillovers are not important. I find that complementarities are important to aggregate volatility, even after I remove observable aggregate shocks from the data. Local spillovers are particularly important, explaining between 15 and 36 percent of manufacturing employment volatility.

Suggested Citation

Shea, John S., Complementarities and Comovements (October 1995). NBER Working Paper No. w5305, Available at SSRN: https://ssrn.com/abstract=225369

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