|M.Sc Student||Kolet Vladislav|
|Subject||Sectoral and Aggregate Output Variability|
|Department||Department of Industrial Engineering and Management||Supervisor||PROF. Benjamin Bental|
|Full Thesis text|
This work presents an attempt to assess the nature of movements across economic sectors during the business cycles and their correspondence to the input-output relationship among producers of different goods and services. The key concept of the research is the measurement of comovement, which makes it possible to evaluate the degree to which fluctuations in the economy's indicators are synchronized.
The first research dedicated to the topic of sectoral comovement was carried out by Hornstein and Praschnik (1997) and aimed at analyzing the comovement across the business cycles between two sectors: a nondurable good producing sector and a durable good producing sector. Their findings pointed out that productivity shocks in the durable goods sector were very big relative to the shocks in the nondurable goods sector. Christiano and Fitzgerald (1998) continued with checking the degree of comovements across sectors in the USA and reported a very high overall degree of comovement across the sectors. However, some sectors demonstrated a comparatively low measure of comovement.
The hypothesis offered in this work is that the measure of comovement between any given sector and aggregate output depends on the proportion of goods/services produced by the sector as intermediate products or as final goods. In addition, it is hypothesized that the comovement is also dependent on the degree of the sector's diversification (measured by the distribution of the industry’s outputs among various kinds of users).
To evaluate the measure of comovement of each industry with the total industrial output I apply simple econometric tools to the series of industrial indices in Israel and in Norway. To draw conclusions concerning the industries' output structure, I use the Input-Output tables.
The results obtained are visually presented in a graphical form. None of them indicates a linear relationship. But the trend lines obtained for particular relationships across different experiments have the same slopes. The results may be interpreted as partially confirming the first hypothesis: the measure of comovement between any given sector and aggregate output depends on the proportion of goods/services produced by the sector as intermediate products or as final goods.