Journal of Monetary Economics 2019 DOI: 10.1016/j.jmoneco.2018.10.002 View full text
Nan Li, Vance L. Martin

Abstract: This paper studies changes in the transmission of common versus sectoral idiosyncratic shocks across different U.S. nonfarm business sectors during the Great Recession, and evaluates the cross-sectoral spillovers. Shocks are identified by dynamic factor methods. We find that the Great Recession is largely a time of heightened impact of common shockswhich accounts for 3/4 of aggregate volatility-and large spillovers of negative financerelated shocks. Moreover, in contrast with the earlier literature that failed…

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