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Search Complementarities, Aggregate Fluctuations,and Fiscal Policy

Jesus Fernandez-Villaverde, Federico Mandelman, Yang Yu and Francesco Zanetti

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We document five novel facts about the role of search effort in forming trading relationships among firms by combining a variety of micro and macro datasets. These facts strongly suggest the presence of search complementarities. To study the implications of these facts for aggregate fluctuations, we build a dynamic general equilibrium model, disciplined by our new firm-level evidence on search effort. The model matches key aspects of the macro and micro data that have remained unaccounted for by standard models, including the time-varying bimodal distribution of output and the strong, nonlinear propagation of shocks. Also, changes to the volatility of shocks have nonlinear effects on macroeconomic fluctuations that advance a novel interpretation of the Great Moderation. Finally, we provide a new account of the state-dependent effects of fiscal policy.

Keywords: Search complementarities; aggregate fluctuations; macroeconomic volatility; government spending. (search for similar items in EconPapers)
JEL-codes: C63 C68 E32 E37 E44 G12 (search for similar items in EconPapers)
Pages: 79 pages
Date: 2022-05
New Economics Papers: this item is included in nep-dge and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://cama.crawford.anu.edu.au/sites/default/fil ... elman_yu_zanetti.pdf (application/pdf)

Related works:
Working Paper: Search Complementarities, Aggregate Fluctuations,and Fiscal Policy (2019) Downloads
Working Paper: Search Complementarities, Aggregate Fluctuations, and Fiscal Policy (2019) Downloads
Working Paper: Search Complementarities, Aggregate Fluctuations, and Fiscal Policy (2019) Downloads
Working Paper: Search Complementarities, Aggregate Fluctuations, and Fiscal Policy (2019) Downloads
Working Paper: Search Complementarities, Aggregate Fluctuations, and Fiscal Policy (2019) Downloads
Working Paper: Search Complementarities, Aggregate Fluctuations, and Fiscal Policy (2019) Downloads
Working Paper: Search Complementarities, Aggregate Fluctuations, and Fiscal Policy (2019) Downloads
Working Paper: Search Complementarities, Aggregate Fluctuations, and Fiscal Policy (2019) Downloads
Working Paper: Search Complementarities, Aggregate Fluctuations, and Fiscal Policy (2019) Downloads
Working Paper: Search Complementarities, Aggregate Fluctuations and Fiscal Policy (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2022-40

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