Related papers: Shock Propagation and Macroeconomic Fluctuations
Will a large economy be stable? Building on Robert May's original argument for large ecosystems, we conjecture that evolutionary and behavioural forces conspire to drive the economy towards marginal stability. We study networks of firms in…
This paper investigates how economic shocks propagate and amplify through the input-output network connecting industrial sectors in developed economies. We study alternative models of diffusion on networks and we calibrate them using…
We study the disequilibrium dynamics of a stylised model of production networks in which firms use perishable and non-substitutable intermediate inputs, so that adverse idiosyncratic productivity shocks can trigger downstream shortages and…
In this letter we present a stochastic dynamic model which can explain economic cycles. We show that the macroscopic description yields a complex dynamical landscape consisting of multiple stable fixed points, each corresponding to a split…
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…
I study the role of industries' position in supply chains in shaping the transmission of final demand shocks. First, I use a novel shift-share design leveraging destination-specific final demand shocks and a new measure of destination…
The transient fluctuation of the prosperity of firms in a network economy is investigated with an abstract stochastic model. The model describes the profit which firms make when they sell materials to a firm which produces a product and the…
Why do capitalist economies recurrently generate crises whose severity is disproportionate to the size of the triggering shock? This paper proposes a structural answer grounded in the evolutionary geometry of production networks. As…
We study a dynamical model of interconnected firms which allows for certain market imperfections and frictions, restricted here to be myopic price forecasts and slow adjustment of production. Whereas the standard rational equilibrium is…
Distress propagation occurs in connected networks, its rate and extent being dependent on network topology. To study this, we choose economic production networks as a paradigm. An economic network can be examined at many levels: linkages…
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…
The increasing integration of world economies, which organize in complex multilayer networks of interactions, is one of the critical factors for the global propagation of economic crises. We adopt the network science approach to quantify…
We examine how monetary shocks spread throughout an economic model characterized by sticky prices and general equilibrium, where the pricing strategies of firms are interlinked, fostering a mutually beneficial relationship. In this dynamic…
Economic models with input-output networks assume that firm or sector (unit) growth is driven by a weighted sum of trade partners' growth and an independently-drawn idiosyncratic shock. I show that the idiosyncratic risk assumption in a…
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…
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.…
Network theory is rapidly changing our understanding of complex systems, but the relevance of topological features for the dynamic behavior of metabolic networks, food webs, production systems, information networks, or cascade failures of…
A new model that combines economic growth rate fluctuations at the microscopic and macroscopic level is presented. At the microscopic level, firms are growing at different rates while also being exposed to idiosyncratic shocks at the firm…
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…
We model sectoral production by cascading binary compounding processes. The sequence of processes is discovered in a self-similar hierarchical structure stylized in the economy-wide networks of production. Nested substitution elasticities…