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Construction and Analysis of a Basic Macro-economic and Earthquake Disaster Model with a Supply Chain Framework and Constraints in Finance Lending Capacity

Author

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  • SATO Motohiro
  • OGURO Kazumasa

Abstract

To perform an analysis on the interaction between an earthquake disaster and economic growth and fiscal policy, we build a basic macro-economic model that incorporates a complex supply chain framework.In particular, 1) Modelling the multi-layered production process (supply chain) that separates intermediate goods and final products, and 2) Reflecting the constraints in finance (credit) lending capacity to business enterprises. With regard to the latter, the loan amount is set at the constant rate of intermediate companies’ retained earnings (profit) in a simplified financial accelerator model. 1) Short-term effect from post-disaster disruption in the supply chain (a decrease in productivity of intermediate goods in the model), 2) Short-term to medium-term effect from lowered lending capacity by financial institutions, and 3) Medium-to long-term effect associated with rising interest rates accompanying the accumulation of public debt.

Suggested Citation

  • SATO Motohiro & OGURO Kazumasa, 2015. "Construction and Analysis of a Basic Macro-economic and Earthquake Disaster Model with a Supply Chain Framework and Constraints in Finance Lending Capacity," ESRI Discussion paper series 324, Economic and Social Research Institute (ESRI).
  • Handle: RePEc:esj:esridp:324
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    File URL: http://www.esri.go.jp/jp/archive/e_dis/e_dis324/e_dis324.pdf
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    Keywords

    public debt; earthquake disaster; economic growth; fiscal policy; supply chain; credit restriction JEL Classification:D40; G21; L10; H60; R30; Q54;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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