Propagation of international supply-chain disruptions between firms in a country

This study shows how import and export shocks propagate through domestic supply chains using actual Japanese supply-chain data and a world input-output table (WIOT) based on firm-level agent-based simulations. We propose three different models with which to connect the domestic firms to a WIOT. Then...

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Bibliographic Details
Published inJournal of risk and financial management Vol. 14; no. 10; pp. 1 - 14
Main Author Inoue, Hiroyasu
Format Journal Article
LanguageEnglish
Published Basel MDPI 01.10.2021
MDPI AG
Subjects
Coronaviruses
COVID-19
Earthquakes
Floods
International trade
Pandemics
propagation
simulation
Suppliers
supply chain
world input-output tables
Thailand
United States > US
China
Japan
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Summary:This study shows how import and export shocks propagate through domestic supply chains using actual Japanese supply-chain data and a world input-output table (WIOT) based on firm-level agent-based simulations. We propose three different models with which to connect the domestic firms to a WIOT. Then, we estimate the value-added losses of Japanese firms caused by shocks of different magnitudes and durations originating in China, in the EU and the US, and globally. The volume and rates at which losses increase are very different across the connection models, which indicates that the assignment of international connections to firms matters greatly. The losses increase sublinearly as the duration expands, which indicates that the shock propagation ultimately saturates the economy. Rates of saturation differ substantially depending on the assignment of international connections. The losses increase superlinearly as the initial reduction rate increases. This occurs because there is a greater probability of one supplier being replaced by other suppliers if the reduction is smaller.
ISSN:1911-8074
1911-8066
1911-8074
DOI:10.3390/jrfm14100461