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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Inventories, demand shocks propagation and amplification in supply chains |
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| Institution | Cornell University |
| Series Name | ArXiv.org |
| Number | 2205.03862 |
| ISSN | 2331-8422 |
| Number of Pages | 52 |
| Date | 2023 |
| Abstract Text | I study the role of industries’ position in supply chains in shaping the transmission of final demand shocks. First, I use a shift-share design based on destination-specific final demand shocks and destination exposure shares to show that shocks amplify upstream. Quantitatively, upstream industries respond to final demand shocks up to three times as much as final goods producers. To organize the reduced form results, I develop a tractable production network model with inventories and study how the properties of the network and the cyclicality of inventories interact to determine whether final demand shocks amplify or dissipate upstream. I test the mechanism by directly estimating the model-implied relationship between output growth and demand shocks, mediated by network position and inventories. I find evidence of the role of inventories in explaining heterogeneous output elasticities. Finally, I use the model to quantitatively study how inventories and network properties shape the volatility of the economy. |
| Free access at | DOI |
| Digital Object Identifier | 10.48550/arXiv.2205.03862 |
| Other Identification Number | merlin-id:23295 |
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| Keywords | Production networks, supply chains, inventories, shock amplification |
| Additional Information | Revised version |