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COVID-19 and the transmission of shocks through domestic supply chains

Author

Listed:
  • McCann, Fergal

    (Central Bank of Ireland)

  • Myers, Samantha

    (Central Bank of Ireland)

Abstract

Inter-sectoral linkages play an important role in transmitting the economic shock resulting from COVID-19. In particular, upstream (supplier) sectors that are not directly exposed to COVID-19 containment policies can be affected if their downstream (customer) firms suffer acute revenue losses. In this Note, we use input-output tables to identify such linkages. We highlight that EUR 35bn-40bn of business-to-business purchases in 2019 were by companies in sectors currently experiencing sharp revenue losses as a result of COVID-19 containment policies; firms making these sales are at risk of experiencing a knock-on liquidity shock through the supply chain. We also note sectors whose customers are less affected, which may act to mitigate the effects of the shock. Finally, we note that transmission from upstream suppliers to downstream firms is likely to be smaller than in the opposite direction, due to the nature of the current shock.

Suggested Citation

  • McCann, Fergal & Myers, Samantha, 2020. "COVID-19 and the transmission of shocks through domestic supply chains," Financial Stability Notes 3/FS/20, Central Bank of Ireland.
    • Handle: RePEc:cbi:fsnote:3/fs/20
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    File URL: https://www.centralbank.ie/docs/default-source/publications/financial-stability-notes/no-3-covid-19-and-the-transmission-of-shocks-through-domestic-supply-chains-(mccann-and-myers).pdf?sfvrsn=4
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    RePEc Biblio mentions

    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Specific pandemics > Covid-19 > Economic consequences > Production and supply

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    Cited by:

    1. Daly, Luke & Lawless, Martina, 2020. "Examination of the Sectoral Overlap of Covid-19 and Brexit Shocks," Papers WP677, Economic and Social Research Institute (ESRI).
    2. Hiroyasu Inoue & Yohsuke Murase & Yasuyuki Todo, 2021. "Do economic effects of the anti-COVID-19 lockdowns in different regions interact through supply chains?," PLOS ONE, Public Library of Science, vol. 16(7), pages 1-19, July.
    3. Yasuyuki Todo & Hiroyasu Inoue, 2021. "Geographic Diversification of the Supply Chains of Japanese Firms," Asian Economic Policy Review, Japan Center for Economic Research, vol. 16(2), pages 304-322, July.

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