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Impact of the topology of global macroeconomic network on the spreading of economic crises


  • Kyu-Min Lee
  • Jae-Suk Yang
  • Gunn Kim
  • Jaesung Lee
  • Kwang-Il Goh
  • In-mook Kim


Throughout economic history, the global economy has experienced recurring crises. The persistent recurrence of such economic crises calls for an understanding of their generic features rather than treating them as singular events. The global economic system is a highly complex system and can best be viewed in terms of a network of interacting macroeconomic agents. In this regard, from the perspective of collective network dynamics, here we explore how the topology of global macroeconomic network affects the patterns of spreading of economic crises. Using a simple toy model of crisis spreading, we demonstrate that an individual country's role in crisis spreading is not only dependent on its gross macroeconomic capacities, but also on its local and global connectivity profile in the context of the world economic network. We find that on one hand clustering of weak links at the regional scale can significantly aggravate the spread of crises, but on the other hand the current network structure at the global scale harbors a higher tolerance of extreme crises compared to more "globalized" random networks. These results suggest that there can be a potential hidden cost in the ongoing globalization movement towards establishing less-constrained, trans-regional economic links between countries, by increasing the vulnerability of global economic system to extreme crises.

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  • Kyu-Min Lee & Jae-Suk Yang & Gunn Kim & Jaesung Lee & Kwang-Il Goh & In-mook Kim, 2010. "Impact of the topology of global macroeconomic network on the spreading of economic crises," Papers 1011.4336,, revised Apr 2011.
  • Handle: RePEc:arx:papers:1011.4336

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    References listed on IDEAS

    1. Domenico Delli Gatti & Mauro Gallegati & Bruce Greenwald & Alberto Russo & Joseph Stiglitz, 2009. "Business fluctuations and bankruptcy avalanches in an evolving network economy," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 4(2), pages 195-212, November.
    2. Raja Kali & Javier Reyes, 2010. "Financial Contagion On The International Trade Network," Economic Inquiry, Western Economic Association International, vol. 48(4), pages 1072-1101, October.
    3. Kaminsky, Graciela L. & Reinhart, Carmen M., 2000. "On crises, contagion, and confusion," Journal of International Economics, Elsevier, vol. 51(1), pages 145-168, June.
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    Cited by:

    1. Sandoval, Leonidas, 2012. "Pruning a minimum spanning tree," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(8), pages 2678-2711.
    2. Rui Faustino, 2016. "Portuguese National Accounts: a network approach," Working Papers Department of Economics 2016/18, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    3. Leonidas Sandoval Junior, 2011. "A Map of the Brazilian Stock Market," Papers 1107.4146,, revised Mar 2013.
    4. Fan, Ying & Ren, Suting & Cai, Hongbo & Cui, Xuefeng, 2014. "The state's role and position in international trade: A complex network perspective," Economic Modelling, Elsevier, vol. 39(C), pages 71-81.
    5. Tanya Ara'ujo & Rui Faustino, 2016. "The Topology of Inter-industry Relations from the Portuguese National Accounts," Papers 1612.06291,
    6. Giulia Rotundo & Anna D’Arcangelis, 2014. "Network of companies: an analysis of market concentration in the Italian stock market," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(4), pages 1893-1910, July.
    7. Kyu-Min Lee & Kwang-Il Goh, 2016. "Strength of weak layers in cascading failures on multiplex networks: case of the international trade network," Papers 1603.05181,, revised May 2016.
    8. repec:eee:energy:v:125:y:2017:i:c:p:234-247 is not listed on IDEAS
    9. Fagiolo, Giorgio & Santoni, Gianluca, 2015. "Human-mobility networks, country income, and labor productivity," Network Science, Cambridge University Press, vol. 3(03), pages 377-407, September.
    10. Araújo, Tanya & Faustino, Rui, 2017. "The topology of inter-industry relations from the Portuguese national accounts," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 479(C), pages 236-248.
    11. Liu, Jiming & Shi, Benyun, 2012. "Towards understanding the robustness of energy distribution networks based on macroscopic and microscopic evaluations," Energy Policy, Elsevier, vol. 49(C), pages 318-327.
    12. Sandoval, Leonidas & Franca, Italo De Paula, 2012. "Correlation of financial markets in times of crisis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(1), pages 187-208.
    13. Leonidas Sandoval Junior, 2014. "Dynamics in two networks based on stocks of the US stock market," Papers 1408.1728,, revised Aug 2014.
    14. Leonidas Sandoval Junior, 2011. "Pruning a Minimum Spanning Tree," Papers 1109.0642,
    15. Hübler, Michael, 2016. "A new trade network theory: What economists can learn from engineers," Economic Modelling, Elsevier, vol. 55(C), pages 115-126.
    16. Tohmé, Fernando & Larrosa, Juan M.C., 2016. "Architectures engender crises: The emergence of power laws in social networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 450(C), pages 305-316.

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