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Business-linkage volatility spillovers between US industries
journal contributionposted on 25.03.2020 by Linh X. D. Nguyen, Simona Mateut, Thanaset Chevapatrakul
Any type of content formally published in an academic journal, usually following a peer-review process.
We examine the volatility transmission across industries and its dependence on the inter-industry business linkages. Our analysis reveals significant cross-industry volatility spillovers, which are clearly associated with the strength of the trade relationship between industries. An industry that is more important to its trade partner – as measured by the shares of inputs or revenue – tends to have stronger volatility spillovers toward its partner and it is less affected by the volatility originating from its partner. Importantly, the strength of the business relationship appears highly relevant for shock spillovers in bad market conditions and is also confirmed at the portfolio level.