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  A model of the indirect losses from negative shocks in production and finance

Krichene, H., Inoue, H., Isogai, T., Chakraborty, A. (2020): A model of the indirect losses from negative shocks in production and finance. - PloS ONE, 15, 9, e0239293.
https://doi.org/10.1371/journal.pone.0239293

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Krichene, Hazem1, Author              
Inoue, Hiroyasu2, Author
Isogai, Takashi2, Author
Chakraborty, Abhijit2, Author
Xing, Lizhi2, Editor
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1Potsdam Institute for Climate Impact Research, Potsdam, ou_persistent13              
2External Organizations, ou_persistent22              

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 Abstract: Economies are frequently affected by natural disasters and both domestic and overseas financial crises. These events disrupt production and cause multiple other types of economic losses, including negative impacts on the banking system. Understanding the transmission mechanism that causes various negative second-order post-catastrophe effects is crucial if policymakers are to develop more efficient recovery strategies. In this work, we introduce a credit-based adaptive regional input-output (ARIO) model to analyse the effects of disasters and crises on the supply chain and bank-firm credit networks. Using real Japanese networks and the exogenous shocks of the 2008 Lehman Brothers bankruptcy and the Great East Japan Earthquake (March 11, 2011), this paper aims to depict how these negative shocks propagate through the supply chain and affect the banking system. The credit-based ARIO model is calibrated using Latin hypercube sampling and the design of experiments procedure to reproduce the short-term (one-year) dynamics of the Japanese industrial production index after the 2008 Lehman Brothers bankruptcy and the 2011 Great East Japan earthquake. Then, through simulation experiments, we identify the chemical and petroleum manufacturing and transport sectors as the most vulnerable Japanese industrial sectors. Finally, the case of the 2011 Great East Japan Earthquake is simulated for Japanese prefectures to understand differences among regions in terms of globally engendered indirect economic losses. Tokyo and Osaka prefectures are the most vulnerable locations because they hold greater concentrations of the above-mentioned vulnerable industrial sectors.

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 Dates: 2020-09-232020
 Publication Status: Finally published
 Pages: -
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 Table of Contents: -
 Rev. Type: Peer
 Identifiers: DOI: 10.1371/journal.pone.0239293
MDB-ID: pending
PIKDOMAIN: RD3 - Transformation Pathways
Research topic keyword: Economics
Organisational keyword: RD3 - Transformation Pathways
Research topic keyword: Complex Networks
Research topic keyword: Extremes
Regional keyword: Asia
Model / method: Agent-based Models
Working Group: Event-based modeling of economic impacts of climate change
 Degree: -

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Title: PloS ONE
Source Genre: Journal, SCI, Scopus, p3, OA
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Pages: - Volume / Issue: 15 (9) Sequence Number: e0239293 Start / End Page: - Identifier: CoNE: https://publications.pik-potsdam.de/cone/journals/resource/r1311121
Publisher: Public Library of Science (PLoS)