Production network, aggregate idiosyncratic accounting earnings, and aggregate output
This study examines whether the input-output production network affects earnings predictability for aggregate output. Decomposing aggregate idiosyncratic earnings growth according to the production network characteristics, I find that aggregate idiosyncratic earnings growth of closely connected firms and central firms predict future (one and two quarter-ahead) GDP. I also show that the predictive power is not fully anticipated by professional macro forecasters. Overall, this paper sheds light on the network-based propagation of microeconomic shocks and the origin of macroeconomic fluctuations.