The Influence Of China’s Supply Network Structure On Economic Fluctuation

According to Acemoglu(2010), in the presence of intersectoral input-output linkages, microeconomic idiosyncratic shocks may lead to aggregate fluctuations.Therefore, this paper make use of the conclusion of cascades ef-fect model to detect the underlying influence of intersectoral net-work structure on the performance of aggregate volatility.Our main results characterize the relationship between the shape parameter of first-order degree distribution of China’s in-tersectoral network (captured by the weighted degree sequence in the graph induced by the input-output relations) and aggregate volatility.Besides, this paper make use of coefficient of Input-output model, such as influence coefficient and reaction coefficient, tak-ing place of higher-order interconnections, to capture the cascade effects, whereby productivity shocks to a industry propagate not only to its immediate downstream customers, but also indirectly through the rest of the economy.Results of this paper highlight that aggregate volatility of China is indeed affected by its structure of intersectoral network, where exists significant asymmetry in the roles that industry play as sup-pliers to other.