Reports
Discussion Papers
No.649 Economic Shocks and Changes in Global Production Structure: Methods for Measuring Economic Resilience
by Yoshihiro HASHIGUCHI, Norihiko YAMANO, Colin WEBB
March 2017
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: Economic resiliency, Structural changes, Input-output, Global value chains
JEL classification: C14, D57, E12, F47
PDF available at http://hdl.handle.net/2344/1622
Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.