Finance wedge during Great Recession drives sectoral contagion, amplifying economic volatility.
The article examines how shocks affected different business sectors during the Great Recession. They found that a new factor emerged during the crisis, creating a divide between the financial service sector and the rest of the economy. While sector-specific shocks usually drive fluctuations, the finance wedge was the main source of volatility during the crisis. The study also showed that input-output linkages did not play a significant role in spreading shocks across sectors.