@article{wto:/content/papers/25189808/75, author = "World Trade Organization", title = "International Trade and Real Transmission Channels of Financial Shocks in Globalized Production Networks", journal= "WTO", year = "2009", volume = "", number = "", pages = "", doi = "https://doi.org/10.30875/4d900fbc-en", url = "https://www.wto-ilibrary.org/content/papers/25189808/75", publisher = "WTO", issn = "", type = "", abstract = "The article analyses the role of international supply chains as transmission channels of a financial shock. Because individual firms are interdependent and rely on each other, either as supplier of intermediate goods or client for their own production, an exogenous financial shock affecting a single firm, such as the termination of a line of credit, reverberates through the productive chain. The transmission of the initial financial shock through real channels is tracked by modelling input-output interactions. The paper indicates that when banks operate at the limit of their institutional capacity, defined by the capital adequacy ratio, and if assets are priced to market, then a resonance effect amplifies the back and forth transmission between real and monetary circuits. The paper illustrates the proposed methodology by computing a supply-driven indicator (IRSIC) and indirect demand-driven impacts on five interconnected economies of different characteristics: China, Japan, Malaysia, Thailand and the United States.", }