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Economic shocks and changes in global production structures: Methods for measuring economic resilience

Author

Listed:
  • Yoshihiro Hashiguchi

    (OECD)

  • Norihiko Yamano

    (OECD)

  • Colin Webb

    (OECD)

Abstract

Conventional studies on 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 summarised 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 dependence on domestic services increases, while the dependence on domestic demand for goods, and the dependence 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.

Suggested Citation

  • Yoshihiro Hashiguchi & Norihiko Yamano & Colin Webb, 2017. "Economic shocks and changes in global production structures: Methods for measuring economic resilience," OECD Science, Technology and Industry Working Papers 2017/09, OECD Publishing.
    • Handle: RePEc:oec:stiaaa:2017/09-en
    DOI: 10.1787/17d0694b-en
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    References listed on IDEAS

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    Cited by:

    1. Arias, Jose & Talavera, Oleksandr & Tsapin, Andriy, 2022. "Bank liquidity and exposure to industry shocks: Evidence from Ukraine," Emerging Markets Review, Elsevier, vol. 53(C).

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    More about this item

    Keywords

    economic resilience; global value chains; input-output; structural changes;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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