Impact of the Topology of Global Macroeconomic Network on the Spreading of Economic Crises

Abstract

Throughout economic history, the global economy has experienced recurring crises. The persistent recurrence of such economic crises calls for an understanding of their generic features rather than treating them as singular events. The global economic system is a highly complex system and can best be viewed in terms of a network of interacting macroeconomic agents. In this regard, from the perspective of collective network dynamics, here we explore how the topology of the global macroeconomic network affects the patterns of spreading of economic crises. Using a simple toy model of crisis spreading, we demonstrate that an individual country's role in crisis spreading is not only dependent on its gross macroeconomic capacities, but also on its local and global connectivity profile in the context of the world economic network. We find that on one hand clustering of weak links at the regional scale can significantly aggravate the spread of crises, but on the other hand the current network structure at the global scale harbors higher tolerance of extreme crises compared to more “globalized” random networks. These results suggest that there can be a potential hidden cost in the ongoing globalization movement towards establishing less-constrained, trans-regional economic links between countries, by increasing vulnerability of the global economic system to extreme crises.

Structure of a Global Network of Financial Companies Based on Transfer Entropy

“…The conclusions are that small world or scale-free networks are, in general, more robust to cascades (the propagation of shocks) than random networks, but they are also more prone to propagations of crises if the most central nodes (usually, the ones with more connections) are not themselves backed by sufficient funds. Most empirical works [24][25][26][27][28][29][30][31][32][33][34][35][36][37][38] are also based on the structure derived from the borrowing and lending between banks, and they show that those networks exhibit a core-periphery structure, with few banks occupying central, more connected positions, and others populating a less connected neighborhood. Those articles showed that this structure may also lead to cascades if the core banks are not sufficiently resistant, and that the network structures changed considerably after the crisis of 2008, with a reduction on the number of connected banks and a more robust topology against the propagation of shocks.…”

Robustness and assortativity for diffusion-like processes in scale-free networks

“…When such a quantity reaches a threshold value, the vertex becomes "bankrupt" and passes its distress to the neighbours. Similarly to previous studies [27][28][29] we set the failure threshold equal to the degree k of vertex. The simulation time is discrete and at every step we add a grain of sand (distress) on a randomly drawn vertex.…”

La equidad y la salud en el trabajo: explorando un área emergente

“…Es fundamental que a corto, medio y largo plazo se definan con mayor atención las acciones a tomar por los pueblos del mundo y sus gobiernos, o al menos la mayor parte de las regiones de este sobre la crisis macroeconómica por la que están atravesando el planeta, ya que precisamente esa insistente postura globalizadora hace que también sea de orden laboral, ambiental, alimentaria, energética y política, en el que un relevante indicador del dominio y control de estas sea el trabajo en condiciones de empleo justo y decente, con su poder para generar igualdad y bienestar social (4,(25)(26)(27)(28) .…”