Banu Demir, Beata Javorcik, Tomasz K. Michalski, Evren Örs, 29 October 2020

Firm-level interconnections have important implications for the propagation of economic shocks and the effectiveness of government policy. This column analyses the effect of a tax policy change on firm-level production chains and performance. Using granular administrative data, it shows that unexpected and non-localised supply shocks propagate downstream through production networks, affecting sales, input usage, and buyer and supplier linkages. In addition, it shows that the effects are amplified in firms facing financial constraints, highlighting the importance of liquidity in the resilience to shocks. 

Jean-Noël Barrot, Julien Sauvagnat, 26 February 2015

Little is known about how adverse shocks spread through production networks. This column presents quantitative evidence on inter-firm contagion using natural disasters as exogenous instruments. Adverse shocks to upstream suppliers lower sales growth and valuation of a downstream firm.

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