Supply-chain propagation of local economic shocks: an interregional general equilibrium analysis of the ISIS conflict in Iraq

Inácio F. Araújo, Kieran P. Donaghy, Eduardo A. Haddad and Geoffrey J.D. Hewings

Economic Systems Research, 2026, vol. 38, issue 2, 175-199

Abstract: Extreme events, particularly human-induced conflicts, pose complex challenges for measuring higher-order effects and their geographical propagation through supply chains. This study develops an interregional computable general equilibrium model to evaluate conflict-related disruptions, integrating input–output linkages and resilience modeling to capture higher-order effects across regions and sectors. We apply the model to the ISIS conflict in Iraq (2014–2017), using an interregional input–output table for 18 Iraqi governorates. The analysis estimates GDP and gross regional product losses, identifies vulnerable sectors, and quantifies regional spillovers from conflict-induced shocks in capital stock, labor markets, and household income. The results reveal significant economic losses in directly affected governorates, offset by modest gains in indirectly affected regions due to spatial substitution in supply chains. This methodology provides a practical tool for post-conflict economic assessment, adaptable to other extreme events, such as natural disasters or climate-related shocks, and supports policymakers in prioritizing recovery and resilience strategies.

Date: 2026
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DOI: 10.1080/09535314.2025.2611259

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