Economic shocks and changes in global production structure: methods for measuring economic resilience

Yoshihiro Hashiguchi, Norihiko Yamano and Webb Colin

No 649, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: Conventional studies into the impacts of economic shocks using global input-output tables (sensitivity analyses) assume stable production structures and thus, only reveal the marginal impacts of changes in final demand. However, when economic shocks occur, whether at home or abroad, economic agents are expected to react to reduce the negative impact or amplify the positive effects. The ability of a country to contain economic losses can be defined as the resilience to economic shocks. Using the OECD's annual Inter-Country Input-Output (ICIO) tables, 1995 to 2011, this paper investigates the relationship between changes in final demand and production structures for 61 economies. Our findings are summarized as follows. Production and final demand structures tend to change to reduce the negative feedbacks from final demand shocks. During economic downturns, structures tend to change so that the dependency on domestic services increases, while the dependency on domestic demand for goods, and the dependency on foreign demand for domestic goods and services, both decrease. Therefore, the domestic service sector seems to play a key role in temporarily containing the negative feedback. Countries that are able to prop up their economy by domestic service sectors instead of domestic goods and foreign sectors are more resilient to negative economic shocks.

Keywords: International trade; Input-output tables; Industrial structure; World; Economic resiliency; Structural changes; Input-output; Global value chains (search for similar items in EconPapers)
JEL-codes: C14 D57 E12 F47 (search for similar items in EconPapers)
Date: 2017-03
New Economics Papers: this item is included in nep-hme, nep-int and nep-mac
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Citations: View citations in EconPapers (1)

Published in IDE Discussion Paper = IDE Discussion Paper, No. 649. 2017-03

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Working Paper: Economic shocks and changes in global production structures: Methods for measuring economic resilience (2017)
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