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The Global Propagation of Economic Shocks: Financial Contagion along International Supply-Chains∗
| Content Provider | Semantic Scholar |
|---|---|
| Author | Schiller, Christoph M. |
| Copyright Year | 2017 |
| Abstract | Using novel, hand-collected data on U.S. suppliers and their international principal customers, we show that firm-level supply chain links are an important channel for the propagation of financial contagion around the world. Following large country-level shocks, such as extreme market-index jumps or natural disasters like the 2011 earthquake and tsunami in Japan, dynamic conditional correlation (DCC) between U.S. suppliers and their customers increases significantly, above and beyond country-level and industry effects. Consistent with a trade-credit based explanation of contagion-propagation along the supply-chain, we find asymmetric effects for positive and negative shocks, larger increases in return correlation for supply-chain pairs with a closer relationship, and a positive relationship of DCC correlation with the use of trade credit by both supplier and customer firms. Our findings highlight the importance of studying global financial contagion at the firm level. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://www.fmaconferences.org/Boston/FMA_Global_Econ_Shocks_Schiller.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
