Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/57598
Authors: 
Escaith, Hubert
Gonguet, Fabien
Year of Publication: 
2009
Series/Report no.: 
WTO Staff Working Paper ERSD-2009-06
Abstract: 
Because individual firms are interdependent and rely on each other, either as supplier of intermediate goods or client for their own production, an exogenous financial shock affecting a single firm, such as the termination of a line of credit, reverberates through the productive chain. The transmission of the initial financial shock through real channels is tracked by modelling input-output interactions. The paper indicates that when banks operate at the limit of their institutional capacity, defined by the capital adequacy ratio, and if assets are priced to market, then a resonance effect amplifies the back and forth transmission between real and monetary circuits. The paper illustrates the proposed methodology by computing a supply-driven indicator (IRSIC) and indirect demand-driven impacts on five interconnected economies of different characteristics: China, Japan, Malaysia, Thailand and the United States.
Subjects: 
international supply chains
monetary circuit
real linkages
transmission channels of financial shock
Asian International Input-Output Tables
JEL: 
C67
F23
F36
G01
L16
Document Type: 
Working Paper

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