Complementarities and Comovements
NBER Working Paper No. 5305
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.
Published: Shea, John S. "Complementarities And Comovements," Journal of Money, Credit and Banking, 2002, v34(2,May), 412-434.