Systemic Effects on Intersectoral Linkages: Framework and Analysis

Muhammad Akmal Farouqi () and Gigih Fitrianto ()
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Muhammad Akmal Farouqi: Department of Economics, Faculty of Economics & Business, Universitas Gadjah Mada
Gigih Fitrianto: Department of Economics, Faculty of Economics & Business, Universitas Gadjah Mada

No 202403001, Gadjah Mada Economics Working Paper Series from Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada

Abstract: The existence of heterogeneity in size and response in each sector cannot be neglected. Moreover, there is an interaction between sectors in the form of trade between intermediate input and intermediate output. This research offers a framework to mathematically and empirically prove the existence of systemic effects on intersectoral linkages in the economy. This research is the first to interpolate data by scaling and updating the IO table using the RAS procedure to obtain quarterly IO datasets from 2001 to 2022 timeframe. Mathematically, on simple deductive proofs that combine Cobb–Douglas and Leontief’s production function, research has revealed the propagation of systemic risk. Furthermore, by utilizing a previous literature model with data from Indonesia, empirical approaches simulate shocks, namely, crude oil prices and business confidence, by using the SVAR procedure. In this regard, the empirical results indicate that systemic effects on intersectoral linkages in Indonesia do exist.

Keywords: Systemic Effect; Intersectoral Linkages; Input‒Output¸ SVAR (search for similar items in EconPapers)
JEL-codes: C53 C67 D57 L16 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2024-03
New Economics Papers: this item is included in nep-ene and nep-sea
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