Beyond Domar Weights: A New Measure of Systemic Importance in Production Networks 

Girish Bahal and Damian Lenzo

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Idiosyncratic supply shocks often coincide with changes in producers’ demand for intermediate inputs. We present a new measure of systemic importance in economies with input-output linkages. Scale centrality measures the aggregate im-pact of simultaneous supply and demand shocks to a producer, which propagate through (in)direct customers and suppliers. Theoretically, scale centrality encompasses and extends an existing centrality measure: Domar weights. Empirically, we ï¬ nd: i) Domar weights underestimate sectors’ systemic importance, ii) sectors with high scale centralities are typically downstream in the supply chain, and iii) industries’ scale centrality can change substantially over time despite the stability of their Domar weights.

Keywords: production networks; propagation of sector-level shocks; disaggregated macroeconomic models (search for similar items in EconPapers)
JEL-codes: D24 D5 D57 E23 E32 O41 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2023-07, Revised 2024-05
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https://cama.crawford.anu.edu.au/sites/default/fil ... revised_may_2024.pdf Revised Version (application/pdf)
https://cama.crawford.anu.edu.au/sites/default/fil ... iginal_july_2023.pdf Original Version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2023-30

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