International production networks and the propagation of financial shocks

• 成果类型: Article
• 署名作者: Chen, Sihao
• 署名单位: Hong Kong Baptist University
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2024.104039
• 发表日期: 2025
• 关键词: Emerging market business cycles; production networks; International trade linkages; Propagation of shocks

摘要

This paper investigates how external sector-level financial shocks are transmitted to a small open economy through international production networks. Using a multi-sector small open economy model, I show analytically that a financial shock to an external production sector affects downstream sectors (through a price effect) and upstream sectors (through a direct demand effect and a complementarity or substitution effect). These effects work through international production networks, affecting the small country's output and GDP. Quantitatively, I construct U.S. sector-level excess bond premia and estimate key parameters for simulations. The simulation exercises show that U.S. financial shocks account for a significant proportion of the fluctuations in Mexico's GDP during the global financial crisis. International production networks amplify the real effect of external financial shocks by a factor of at least three during the crisis.