Permanent Shocks and Spillovers: A Sectoral Approach Using a Structural VAR

In an empirical two-sector model, it is investigated if permanent shocks originating from one sector have an effect on production in the other sector. The VAR contains three variables: employment in the private sector, and value added in industry and in the rest of the private sector. I found that shocks originating from one sector have no effect on production in the other sector, neither in the short, nor in the long run. The only common source of fluctuations in sectoral production is shocks to the labor trend. * I am grateful to Nils Gottfries, Per Jansson and Lars-Erik Öller for valuable discussions and comments. I also thank other seminar participants at the NIER. ** National Institute of Economic Research, P.O. Box 3116, SE-103 62 Stockholm, Sweden, email:[email protected], phone: + 46 8 4535989