Related papers: Rigidity and default in production networks
The classical reduced-form and filtration expansion framework in credit risk is extended to the case of multiple, non-ordered defaults, assuming that conditional densities of the default times exist. Intensities and pricing formulas are…
We consider a general tractable model for default contagion and systemic risk in a heterogeneous financial network, subject to an exogenous macroeconomic shock. We show that, under some regularity assumptions, the default cascade model…
We introduce a new mean-field game framework to analyze the impact of carbon pricing in a multi-sector economy with defaultable firms. Each sector produces a homogeneous good, with its price endogenously determined through market clearing.…
We consider a network of bank holdings, where every holding has two subsidiaries of different types. A subsidiary can trade with another holding's subsidiary of the same type. Holdings support their subsidiaries up to a certain level when…
This paper studies the impact of funding market frictions on bond prices and market-wide liquidity. Using proprietary transaction-level data on all gilt-backed repo and reverse-repo trades, we demonstrate how the market power of individual…
We consider a network consisting of $n$ components (links or nodes) and assume that the network has two states, up and down. We further suppose that the network is subject to shocks that appear according to a counting process and that each…
It had been believed in the conventional practice that the risk of a bank going bankrupt is lessened in a straightforward manner by transferring the risk of loan defaults. But the failure of American International Group in 2008 posed a more…
This paper analytically demonstrates that, in a Two-Agent New Keynesian model with Rotemberg-type price and wage rigidities, monetary transmission can be amplified when two mechanisms are sufficiently strong: the heterogeneity-induced…
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…
Can uncertainty about credit availability trigger a slowdown in real activity? This question is answered by using a novel method to identify shocks to uncertainty in access to credit. Time-variation in uncertainty about credit availability…
The universal prevalence of cooperation is puzzling, as defection typically yields higher payoffs than cooperation, motivating searches for hidden pathways to cooperation. Here we study a game-theoretic model on a lattice structured…
Diffusion in a linear potential in the presence of position-dependent killing is used to mimic a default process. Different assumptions regarding transport coefficients, initial conditions, and elasticity of the killing measure lead to…
In this paper, I examine why some firms have zero leverage. I fail to find evidence that firms are unlevered because of managerial entrenchment since these firms do not have weaker corporate governance. I reject the hypothesis that firms…
Why is the U.S. industry-level productivity dispersion countercyclical? Theoretically, we build a duopoly model in which heterogeneous R&D costs determine firms' optimal behaviors and the equilibrium technology gap after a negative profit…
In this paper, we study the robustness of interdependent networks, in which the state of one network depends on the state of the other network and vice versa. In particular, we focus on the interdependency between the power grid and…
We show how to treat supply networks as physical transport problems governed by balance equations and equations for the adaptation of production speeds. Although the non-linear behaviour is different, the linearized set of coupled…
Various social, financial, biological and technological systems can be modeled by interdependent networks. It has been assumed that in order to remain functional, nodes in one network must receive the support from nodes belonging to…
It has been proved that network structure plays an important role in addressing a collective behaviour. In this paper we consider a network of firms and corporations and study its metastable features in an Ising based model. In our model,…
We provide a strategic model of the formation of production networks that subsumes the standard general equilibrium approach. The objective of firms in our setting is to choose their supply relationships so as to maximize their profit at…
Much of the analysis of economic growth has focused on the study of aggregate output. Here, we deviate from this tradition and look instead at the structure of output embodied in the network connecting countries to the products that they…