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on Network Economics |
| By: | Jorge Miranda-Pinto; Eugenio I. Rojas; Felipe Saffie; Alvaro Silva |
| Abstract: | We study how production networks shape the severity of Sudden Stops. We build a small open economy model with collateral constraints and input–output linkages, derive a sufficient statistic that maps network structure into the amplification of tradable shocks, and show that a planner optimally introduces sectoral wedges to reduce amplification. Using OECD input–output data and Sudden Stop episodes, we document systematic network differences between emerging and advanced economies and show they predict crisis severity. A calibrated three-sector DSGE model disciplined by these differences reveals that endowing an advanced economy with an emerging-market production network moves most of the way toward the observed emerging–advanced Sudden Stop gap. |
| JEL: | E32 F32 G01 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34604 |
| By: | M. Sadra Heydari; Zafer Kanik; Santiago Montoya-Bland\'on |
| Abstract: | We introduce heterogeneous R&D productivities into an endogenous R&D network formation model, generalizing the framework in Goyal and Moraga-Gonzalez (2001). Heterogeneous productivities endogenously create asymmetric gains for connecting firms: the less productive firm benefits disproportionately, while the more productive firm exerts greater R&D effort and incurs higher costs. For sufficiently large productivity gaps between two firms, the more productive firm experiences reduced profits from being connected to the less productive one. This overturns the benchmark results on pairwise stable networks: for sufficiently large productivity gaps, the complete network becomes unstable, whereas the Positive Assortative (PA) network -- where firms cluster by productivity levels -- emerges as stable. Simulations show that the PA structure delivers higher welfare than the complete network; nevertheless, welfare under PA formation follows an inverted U-shape in the fraction of high-productivity firms, reflecting crowding-out effects at high fractions. Altogether, a counterintuitive finding emerges: economies with higher average R&D productivity may exhibit lower welfare through (i) the formation of alternative stable R&D network structures or (ii) a crowding-out effect of high-productivity firms. Our findings highlight that productivity-enhancing policies should account for their impact on endogenous R&D alliances and effort, as such endogenous responses may offset or even reverse the intended welfare gains. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.23337 |
| By: | Victor Monteiro; Diogo Abry Guillen; Thiago Christiano Silva |
| Abstract: | We develop an endogenous production network economy model coupled with incomplete information, where the degree of information at the firm-level is the engine of the network formation and distorts both producers’ decision and the aggregate allocations of the economy. To tie this relationship, we consider that producers find their suppliers through a decentralized search given their level of information, in which firms are more or less informed depending on how many linkages of the production network they know. In our model, we establish the existence, uniqueness and efficiency of the network equilibrium for a given level of information, and show that the higher the level of information, (i) the more stable the network, (ii) the lower the density of the network, and (iii) the higher the spillover impact of a productivity shock on the aggregate output. We also design an optimal contract to show that the combination of informationenhancing policies and tax-subsidies is able to mimic a Walrasian full information equilibrium. Finally, we use a proprietary dataset that covers a large share of Brazilian financial transactions to investigate stylized facts about information and network formation as well as test empirically the implication of our model. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bcb:wpaper:640 |
| By: | Agostino Capponi; Jin-Wook Chang |
| Abstract: | This paper investigates how settlement speed affects financial stability in payment networks, taking into account netting benefits, liquidity costs, and counterparty risks. Our analysis reveals that faster settlements have ambiguous effects on systemic risk and social welfare. The optimal settlement speed is determined by the network structure and the trade-off between netting efficiency and liquidity costs on one hand, and the probability of counterparty defaults on the other. Notably, we identify conditions, particularly under liquidity stress, where faster settlement can paradoxically increase systemic risk by amplifying crisis severity, even while reducing crisis probability. Our results have important policy implications, arguing against a one-size-fits-all approach to settlement speed design. |
| Keywords: | Settlement; Payment systems; Financial network; Financial stability; Systemic risk |
| JEL: | D49 D53 G01 G21 G33 |
| Date: | 2025–11–20 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:2025-101 |
| By: | I. Sebastian Buhai |
| Abstract: | We develop a continuous-time model of reputational disclosure in directed networks of biased intermediaries with career concerns. A payoff-relevant fundamental follows a diffusion and a decision maker chooses actions to track it. Experts obtain verifiable signals that reach the decision maker only if relayed by intermediaries. Intermediaries choose whether to forward evidence and an observable disclosure clock that controls the arrival rate of disclosure opportunities. Because clocks are public, silence is state dependent: when the clock is on, delay is informative and reputationally costly; when it is off, silence is mechanically uninformative. Disclosure becomes a real option on reputational capital. Along any expert-decision maker path, Markov perfect Bayesian equilibria are ladder policies with finitely many posterior cutoffs, and clock-off windows eliminate knife-edge mixing. With sufficiently high reputational stakes and low discounting, dynamic incentives rule out persistent suppression and guarantee eventual transmission of all verifiable evidence along the path, even when bias reversals block static unraveling. We then study network design and formation. Absent the high-reputation regime, among trees exactly the bias-monotone ones sustain disclosure. Under homogeneous reputational intensities the bias-ordered line is dynamically optimal; with heterogeneous intensities, optimal design screens by topology, placing high-reputation intermediaries on direct parallel routes rather than in series. In an endogenous link-formation game, pairwise stable networks can be inefficiently sparse or redundantly dense because agents ignore the option-value externalities their links create or destroy for others' reputational assets. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.22987 |