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Georgios Nikolakoudis on Expectations and Fluctuations in Production Networks

Georgios Nikolakoudis
May 14, 2024
12:20 pm - 1:15 pm
Student Research Workshop

More from this series
Room 108

I study the transmission of macroeconomic shocks in a general equilibrium model of production networks when input choices are made under incomplete information. Theoretically, I characterize how incomplete information interacts with the network structure of the economy to affect the propagation of demand and productivity shocks to output and prices. Higher productivity uncertainty (relative to demand uncertainty) increases the importance of “distant” firm-to-firm links in propagating sectoral shocks, thereby increasing the effect of productivity shocks on the macroeconomy. Quantitatively, the model generates substantial time-variation in the response of output to sectoral shocks when calibrated to the US input-output network and historical measures of uncertainty. The model implies that policies that reduce supply chain risk can therefore enhance the efficacy of monetary policy while simultaneously reducing the impact of supply chain disruptions on output.