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on Network Economics |
| By: | Tamara Broderick; Ali Jadbabaie; Vanessa Lin; Manuel Quintero; Arnab Sarker; Sean R. Sinclair |
| Abstract: | Surety bonds are financial agreements between a contractor (principal) and obligee (project owner) to complete a project. However, most large-scale projects involve multiple contractors, creating a network and introducing the possibility of incomplete obligations to propagate and result in project failures. Typical models for risk assessment assume independent failure probabilities within each contractor. However, we take a network approach, modeling the contractor network as a directed graph where nodes represent contractors and project owners and edges represent contractual obligations with associated financial records. To understand risk propagation throughout the contractor network, we extend the celebrated Friedkin-Johnsen model and introduce a stochastic process to simulate principal failures across the network. From a theoretical perspective, we show that under natural monotonicity conditions on the contractor network, incorporating network effects leads to increases in both the average risk and the tail probability mass of the loss distribution (i.e. larger right-tail risk) for the surety organization. We further use data from a partnering insurance company to validate our findings, estimating an approximately 2% higher exposure when accounting for network effects. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.05691 |
| By: | Andrea Ariu; Giulia Rivolta (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore) |
| Abstract: | This paper quantifies the micro- and macro-level consequences of the sudden appreciation of the Swiss franc in 2015, one of the sharpest and most persistent currency movements in recent decades. Using detailed firm-level data on French imports and exports, we show that the Swiss franc appreciation led to a rise in exports, driven mainly by the entry of new firms and new products, while imports increased only briefly due to a spike in prices among continuing firm–product pairs. These dynamics mirror a textbook J-curve adjustment and reveal the firm-level mechanisms underlying this aggregate response. On the macro side, we trace how the shock propagated through supply chains, capturing both direct and indirect exposures through input–output linkages. This network-based perspective uncovers a small but negative overall impact on French GDP, driven by the stronger hit to importers, more reliant on non-euro currencies and more central within domestic production networks, who acted as key conduits transmitting the negative side of the shock across the economy. |
| Keywords: | Exchange rate shocks, international trade, production network. |
| JEL: | F14 F31 F44 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:ctc:serie1:def146 |
| By: | Fourné, Marius |
| Abstract: | Climate policies do not operate in isolation but propagate through global production networks, affecting industries beyond national borders. This paper combines international input-output data with a granular instrumental variable approach to capture how foreign regulations transmit through upstream and downstream linkages. Distinguishing between market-based policies, non-market regulations, and technology support, the analysis shows that foreign climate policies can enhance domestic productivity, with effects shaped by industry characteristics and operating through technological adjustment along supply chains. The results underscore the importance of accounting for international spillovers when evaluating the economic impact of environmental regulation. |
| Keywords: | climate policy, environmental regulations, global value chains, green innovation, international trade, productivity |
| JEL: | F18 L16 O44 Q37 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwhdps:330918 |
| By: | Hafner, C. M.; Linton, O. B.; Wang, L. |
| Abstract: | We propose MARSLiQ (Multivariate AutoRegressive Smooth Liquidity), a new multivariate model for daily liquidity that combines slowly evolving trends with short-run dynamics to capture both persistent and transitory liquidity movements. In our framework, each asset's liquidity is decomposed into a smooth time-varying trend component and a stationary short-run component, allowing us to separate long-term liquidity levels from short-term fluctuations. The trend for each asset is estimated nonparametrically and further decomposed into a common market trend and idiosyncratic (asset-specific) trends, and seasonal trends, facilitating interpretation of market-wide liquidity shifts versus firm-level effects. We introduce a novel dynamic structure in which an asset's short-run liquidity is driven by its own past liquidity as well as by lagged liquidity of a broad liquidity index (constructed from all assets). This parsimonious specification-combining asset-specific autoregressive feedback with index-based spillovers-makes the model tractable even for high-dimensional systems, while capturing rich liquidity spillover effects across assets. Our model's structure enables a clear analysis of permanent vs. transitory liquidity shocks and their propagation throughout the market. Using the model's Vector MA representation, we perform forecast error variance decompositions to quantify how shocks to one asset's liquidity affect others over time, and we interpret these results through network connectedness measures that map out the web of liquidity interdependence across assets. |
| Keywords: | Forecast Error Decomposition, Liquidity Spillovers, Multiplicative Error Model, Network Connectedness, Nonparametric Trends |
| JEL: | C12 C14 C32 C53 C58 |
| Date: | 2025–10–20 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2569 |
| By: | D\'avid Csercsik; \'Ad\'am Sleisz |
| Abstract: | When the traded energy and reserve products between zones are co-allocated to optimize the infrastructure usage, both deterministic and stochastic flows have to be accounted for on interconnector lines. We focus on allocation models, which guarantee deliverability in the context of the portfolio bidding European day-ahead market framework, assuming a flow-based description of network constraints. In such models, as each unit of allocated reserve supply implies additional cost, it is straightforward to assume that the amount of allocated reserve is equal to the accepted reserve demand quantity. However, as it is illustrated by the proposed work, overprocurement of reserves may imply counterintuitive benefits. Reserve supplies not used for balancing may be used for congestion management, thus allowing valuable additional flows in the network. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.01877 |
| By: | Lars Hornuf; Daniel Vrankar |
| Abstract: | Those seeking to drum up public support for the space industry frequently cite its potential to generate valuable spillovers to other industries. However, existing research on spillover effects overlooks differences in business models among commercial actors and focuses only on individual projects or specific space agencies. We analyze how evolving business models influence spillovers by comparing the dynamic capabilities of traditional aerospace conglomerates to those of new space firms, using a unique dataset of 35, 696 space-related patent applications. We find that, in addition to industries directly related to space, such as aeronautics, sectors like manufacturing and communication technology in particular benefit from space activities. At the firm level, we observe that new space business models present greater spillover potential and generate more spillovers than traditional aerospace conglomerates. However, traditional conglomerates such as Airbus or Boeing induce spillovers into digital systems and clean tech, while new space firms cannot translate their digital business models into digital spillovers and occupy more peripheral positions in the innovation network of space. Additionally, based on two different innovation metrics and more than 1.6 million additional patent applications, we find no evidence that the business models of the space industry have generally led to more spillovers than other high-tech industries. |
| Keywords: | new space business models, new space economy, innovation, dynamic capabilities, spillover, patent data |
| JEL: | D62 H57 L20 L21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12236 |