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Analyses of Aggregate Fluctuations of Firm Networks Based on the Self-Organized Criticality Model and Control Theory

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  • INOUE Hiroyasu

Abstract

This study examines the difference in the size of avalanches among industries triggered by demand shocks, which can be rephrased by control of the economy or fiscal policy, and by using the production-inventory model and observed data. In addition, we investigate how differently demand shocks affect each firm by using control theory that utilizes network topology. We obtain the following results. (1) The size of avalanches follows power law. (2) The mean sizes of avalanches for industries are diverse, but their standard deviations highly overlap. (3) We compare the simulation with an input-output table and with the actual policies and find them to be compatible. (4) The expectations about becoming involved in avalanches are diverse and depend on the industries. (5) It is difficult for service industries and small firms to be affected by the control. On the other hand, mining, manufacturing, and wholesale industries are strongly affected by the control. (6) If we clip a network in descending order of capital size, we do not lose the control effect.

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  • INOUE Hiroyasu, 2016. "Analyses of Aggregate Fluctuations of Firm Networks Based on the Self-Organized Criticality Model and Control Theory," Discussion papers 16044, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:16044
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    Cited by:

    1. Inoue, Hiroyasu & Todo, Yasuyuki, 2017. "Firm-level simulation of supply chain disruption triggered by actual and predicted earthquakes," MPRA Paper 82920, University Library of Munich, Germany, revised 22 Feb 2017.
    2. Hiroyasu Inoue & Yasuyuki Todo, 2019. "Propagation of negative shocks across nation-wide firm networks," PLOS ONE, Public Library of Science, vol. 14(3), pages 1-17, March.

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