Related papers: Risk in Network Economies
In the wake of the 2008 financial crisis the role of strongly interconnected markets in fostering systemic instability has been increasingly acknowledged. Trade networks of commodities are susceptible to deleterious cascades of supply…
The interconnectedness of financial institutions affects instability and credit crises. To quantify systemic risk we introduce here the PD model, a dynamic model that combines credit risk techniques with a contagion mechanism on the network…
We study how idiosyncratic firm-level shocks generate aggregate volatility and tail risk when they propagate through a production network under overlapping adjustment: new productivity draws arrive before the economy reaches the static…
National economies rest on networks of millions of customer-supplier relations. Some companies -- in the case of their default -- can trigger significant cascades of shock in the supply-chain network and are thus systemically risky. Up to…
An economy-wide production network, manifested through monetary input-output coefficients, inherently destabilizes during the general equilibrium propagation of sectoral productivity shocks when substitution elasticities are non-neutral.…
We model the production of complex goods in a large supply network. Each firm sources several essential inputs through relationships with other firms. Individual supply relationships are at risk of idiosyncratic failure, which threatens to…
This paper examines how shocks to currency volatilities predict exchange rates. Using option-implied volatilities, we construct a dynamic, directed network of volatility connections. Currencies that transmit more volatility shocks, which…
Physical risks, such as droughts, floods, rising temperatures, earthquakes, infrastructure failures, and geopolitical conflicts, can ripple through global supply chains, raising costs, and constraining production across industries.…
Supply chains are the backbone of the global economy. Disruptions to them can be costly. Centrally managed supply chains invest in ensuring their resilience. Decentralized supply chains, however, must rely upon the self-interest of their…
We model an economy-wide production network by cascading binary compounding functions, based on the sequential processing nature of the production activities. As we observe a hierarchy among the intermediate processes spanning the empirical…
A growing body of studies on systemic risk in financial markets has emphasized the key importance of taking into consideration the complex interconnections among financial institutions. Much effort has been put in modeling the contagion…
This paper investigates how the granularity of supply-chain data affects the propagation of economic shocks through production networks. Using newly constructed establishment-level supply chains with product-level information links for…
It is generally accepted that neighboring nodes in financial networks are negatively assorted with respect to the correlation between their degrees. This feature would play an important 'damping' role in the market during downturns (periods…
Production in an economy is a set of firms' activities as suppliers and customers; a firm buys goods from other firms, puts value added and sells products to others in a giant network of production. Empirical study is lacking despite the…
We propose a financial liquidity policy sharing method for firm-to-firm supply networks, introducing a scalable autonomous control function for viable complex adaptive supply networks. Cooperation and competition in supply chains is…
Understanding disaggregate channels in the transmission of monetary policy is of crucial importance for effectively implementing policy measures. We extend the empirical econometric literature on the role of production networks in the…
We study the interaction between network effects and external incentives on file sharing behavior in Peer-to-Peer (P2P) networks. Many current or envisioned P2P networks reward individuals for sharing files, via financial incentives or…
Assessing the resilience of the economy requires accounting for its intrinsic multi-layer nature, by assessing for instance how disruptions at the firm level spread through the production network and propagate to the banking sector. Methods…
We develop a model for contagion in reinsurance networks by which primary insurers' losses are spread through the network. Our model handles general reinsurance contracts, such as typical excess of loss contracts. We show that simpler…
The DebtRank algorithm has been increasingly investigated as a method to estimate the impact of shocks in financial networks, as it overcomes the limitations of the traditional default-cascade approaches. Here we formulate a dynamical…