Uncertainty and Sectoral Shifts: The Interaction Between Firm-Level and Aggregate-Level Shocks, and Macroeconomic Activity

This study predicts and finds that the interaction of firm-level and aggregate-level 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. This paper was accepted by Mary Barth, accounting.

• 저널Management Science · 64(1) · 198–214
• 토픽Market Dynamics and Volatility · Economics and Econometrics
• DOI10.1287/mnsc.2016.2581
• 저자Alon Kalay, Suresh Nallareddy, Gil Sadka