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Enhancing Resilience: Model-based Simulations

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  • d'Artis Kancs

Abstract

Since several years, the fragility of global supply chains (GSCs) is at historically high levels. In the same time, the landscape of hybrid threats is expanding, e.g. the recent attempts of energy weaponisation by Russia. This paper aims to assess the economies' foreign input reliance and foreign market reliance, identify possible vulnerabilities by simulating shocks to GSCs in presence of uncertainty. We stress test resilience by simulating most demanding circumstances and crystallise relevant, effective and efficient policy solutions. Conceptually, we employ a newly developed modelling framework, which is specially designed to account for the increasingly inter-dependent GSCs and study resilience and robustness in presence of hybrid shocks. The scalable data model is parameterised by combining World-Input Output Tables with those from the Inter-Country Input-Output. Model-based simulations facilitate decision making by providing interoperable and directly comparable quantifications of counterfactual resilience and robustness strategic choices and allow to identify policy solutions to meet the baseline resilience requirements.

Suggested Citation

  • d'Artis Kancs, 2022. "Enhancing Resilience: Model-based Simulations," EERI Research Paper Series EERI RP 2022/10, Economics and Econometrics Research Institute (EERI), Brussels.
    • Handle: RePEc:eei:rpaper:eeri_rp_2022_10
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    References listed on IDEAS

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    1. Bomin Jiang & Daniel Rigobon & Roberto Rigobon, 2022. "From Just-in-Time, to Just-in-Case, to Just-in-Worst-Case: Simple Models of a Global Supply Chain under Uncertain Aggregate Shocks," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(1), pages 141-184, March.
    2. Rebecca Freeman & Richard Baldwin, 2022. "Risks and Global Supply Chains: What We Know and What We Need to Know," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 153-180, August.
    3. Pavel Ciaian & d'Artis Kancs & Miroslava Rajcaniova, 2021. "Interdependencies between Mining Costs, Mining Rewards and Blockchain Security," Annals of Economics and Finance, Society for AEF, vol. 22(1), pages 25-62, May.
    4. Johnson, Robert C. & Noguera, Guillermo, 2012. "Accounting for intermediates: Production sharing and trade in value added," Journal of International Economics, Elsevier, vol. 86(2), pages 224-236.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Resilience; Global Supply Chain; model; uncertainty; risk; ambiguity; World-Input Output Tables;
    All these keywords.

    JEL classification:

    • E7 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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