International Supply Chains as Real Transmission Channels of Financial Shocks

Hubert Escaith and Fabien Gonguet ()
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Fabien Gonguet: Ecole Polytechnique-ENSAE, Postal: Paris, France

Journal of Financial Transformation, 2011, vol. 31, 83-97

Abstract: The article analyses the role of international supply chains as transmission channels of a financial shock. Because individual firms are interdependent and rely on each other, either as supplier or client, a financial shock affecting a single firm, such as the termination of a line of credit, reverberates through the productive chain. The transmission of the initial financial shock through real channels is tracked by modelling international input-output interactions. When banks operate at the limit of their institutional capacity, defined by the capital adequacy ratio, and if assets are priced to market, then a resonance effect amplifies the back and forth transmission between real and monetary circuits. The paper illustrates the proposed methodology on the USA and 9 developed and developing Asian economies.

Keywords: international supply chains; monetary circuit; real linkages; transmission channels; financial shock; Input-Output (search for similar items in EconPapers)
JEL-codes: C67 F23 F36 G01 L16 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:1446

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